Business

Primark boosts profits at AB Foods

Primark store
Image caption The Primark chain is now expanding across Europe

Clothing retailer Primark's "exceptionally strong" performance has helped owner Associated British Foods to report a big rise in profits.

Total sales at Primark rose by 24% in the six months to 2 March, while like-for-like sales - which strip out new store openings - were 7% higher.

Profit margins improved thanks to lower cotton prices and better trading.

Primark's performance helped AB Foods to report half-year pre-tax profits of £415m, up from £329m a year earlier.

In addition to Primark, AB Foods also owns British Sugar, and a number of well-known food brands such as Kingsmill, Ryvita and Ovaltine.

Revenue across the whole group rose to £6.3bn over the six-month period, up 10% from a year earlier.

Rapid expansion

With the UK economy and economies across Europe seeing weak or negative economic growth, Primark's focus on cheap clothing has proved to be popular among cash-strapped consumers.

"The Primark success story continues. The performance from Primark in the first half was exceptionally strong," said AB chairman Charles Sinclair.

"Trading in the period was very strong, the profit margin was much improved, customers in continental Europe have taken enthusiastically to the Primark brand and there is very real momentum in the addition of selling space."

The chain has been expanding rapidly. AB said that it had opened 15 new stores in the past six months, taking the total to 257.

Its expansion into Europe includes six new stores in Spain, two in Germany, two in Austria and one in the Netherlands. It plans to open stores in France in the next financial year.

It is faring much better than rival UK clothing retailers. In the first three months of the year, Marks and Spencer reported a 3.8% fall in general merchandise sales, which includes clothing.

However, the 7% rise in like-for-like sales at Primark over the half-year implies a slowdown in recent sales, as the chain had recorded a 9% increase in underlying sales during the first 16 weeks of the period.

As a result, while AB Foods expects strong profit growth from Primark in the full financial year, it would not be at the "same level" seen in the first half, said Mr Sinclair.

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