Monday, 27 February 2017

Primark owner sees no sign of Brexit spending slowdown



The owner of fashion chain Primark said it had seen no sign of UK consumers reining in spending as it pencilled in a 2% rise in like-for-like sales.
 
Associated British Foods said the retailer had performed well in the UK despite fears that the fall in pound since the Brexit vote, which has started to drive up inflation, was hurting consumers.


However, the group did warn that profit margins were facing a squeeze in coming months as the impact of sterling's slump filtered through to its purchase of goods in dollars.


Primark like-for-like sales including its overseas stores were seen as flat for the six months to 4 March though when including the impact of currency changes and continuing store expansion they are on course to rise 22%.


The better UK performance came despite latest official figures pointing to falling retail sales, and warnings that the rise in inflation will hit household spending.


Finance director John Bason said: "There is not an indication of people pulling back at this stage."


He pointed out that while inflation had risen it was still below 2%.


"The consumer in the UK has got more disposable income this year than they had a year ago - fact.
 
 
"That's where we are at this stage, the full effect of the devaluation of sterling still has to play through."


ABF said it saw a £50m benefit from the fall in the pound in the first half - since it means overseas earnings translate into higher sterling value.


However, it is also affected negatively by the change because it buys products for its stores in dollars - and said the effect on its profit margins would increase in the second half.


ABF said it was pressing ahead with domestic and international expansion at Primark, with stores in Uxbridge, Belgium, Spain and the US slated to open over the next three months.


The firm, which also owns Twinings tea and Kingsmill bread, said it expects "excellent progress" in group profits over the period and its outlook for the full year is unchanged.


In November, chief executive George Weston said the pound's fall would bring "benefits and challenges" to the group.




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