Primark's U.S. Growth Offsets Weakened U.K. Performance for AB Foods -- Update
July 04 2019 - 7:46AM
Dow Jones News
--AB Foods said fashion-chain Primark has increased U.S. sales,
offsetting weakness in the U.K.
--AB Foods expects Primark to see good profit growth for the
full year and maintained its overall guidance
By Adriano Marchese
Associated British Foods PLC (ABF.LN) said Thursday that its
low-cost fashion chain Primark continues to deliver encouraging
like-for-like and total sales growth in the U.S., helping to offset
a weaker U.K. performance.
Overall Primark like-for-like sales declined in the third
quarter, the company said, held back by unseasonable weather in May
in the U.K.
On a constant currency and actual exchange rate basis, sales
were 4% ahead in the 40 weeks to June 22. This was driven by an
increase in selling space, with an additional 0.5 million square
feet of space in the third quarter with nine new stores.
As more middle-class consumers in the U.S. turn to discount
chains for their shopping, Primark's low prices should attract more
interest there, according to Russ Mould, an analyst at investment
platform AJ Bell.
"This is a major positive given how British retailers have
notoriously struggled to crack the American market. Tesco, Dixons
and HMV are good examples of retailers jumping over the pond only
to subsequently do a U-turn," Mr. Mould said.
The company said Primark's operating margin in its first half to
March 2 was 11.7%, well ahead of the of 9.8% in the same period
last year. AB Foods said the main driver of the increase was a
weaker U.S. dollar on contracted purchases, although better buying
and tight stock management contributed as well.
Primark contributed to growth in AB Foods' revenue, which in the
first 40 weeks of fiscal 2019 was 3% ahead of the same period last
year at constant currency.
At actual exchange rates, AB Foods said revenue grew 2% in the
period to June 22, compared with last year's equivalent period.
In the third quarter, the grocery business generated revenue
that was 1% ahead of last year.
Sugar revenue was in line with the prior year, an improvement on
the decline in sales in the first half of the year, AB Foods said.
It said it expects production for the 2019-2020 campaign to at
least equal what it produced last year, at 1.15 million metric
tons.
The company's ingredients business generated revenue that was 5%
ahead of last year.
AB Foods said that for the full year, it expects good profit
growth in Primark and underlying progress in its grocery business.
The full-year outlook for the group remains unchanged, with
adjusted earnings per share expected to be in line with last
year.
Write to Adriano Marchese at adriano.marchese@dowjones.com
(END) Dow Jones Newswires
July 04, 2019 07:31 ET (11:31 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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