AB Foods will post higher sales and profits this year, courtesy of its fashion flagship Primark. Despite a volatile summer, inflation and restructuring in Germany, the fashion retailer is now counting on a 15 % sales increase.
10 billion in sales
The group’s food brands (including Twinings and Ovaltine) continue to do well, especially in the United States, while its sugar business also performed slightly better than expected. AB Foods is a major processor of sugar beet in the United Kingdom, but it struggled this year. This autumn’s crop is already looking better.
Primark, on the other hand, is AB Foods’ big star. Despite high inflation and a difficult consumer market, sales this year will increase by 15 %, with a comparable sales growth of 9 %. Primark is now counting on sales of around 9 billion pounds (10 billion euros), thanks to selective price increases, well-received ranges and strong performances in new shops.
Despite challenging weather conditions this summer, sales in Europe (excluding the UK) are expected to be up 18 % in Q4. This is despite the fact that Primark is restructuring in Germany, cutting 200,000 sqm of sales surface there this year.
In the United States, fourth-quarter sales will even go up 45 % thanks to the opening of four new shops. The British click&collect test is catching on as well: following the successful trial with children’s clothes, from tomorrow customers can also reserve women’s clothes for collection in stores. The fashion discounter also launched an improved website across the world, where customers can already see part of the available range.
Primark estimates its adjusted operating profit margin at around 8 % this year. Next year’s gross margin would recover significantly, as material costs have been falling again in recent weeks, as have exchange rates and freight costs.