Friday, 6 July 2018

Primark lifts profit forecast due to fewer markdowns



Primark says profits will be better than expected in its current financial year because it has escaped the worst of the discounting frenzy forced upon many competitors.
 
The retailer's parent firm painted a rosy picture for Primark sales, while fashion rival Superdry also joined it in recording a strong trading performance amid the struggles facing much of the wider high street in the UK.
 
 
Primark's trading update for the first 40 weeks of its financial year to 23 June showed total sales 6% ahead of the same period last year - with UK sales said to be performing well with like-for-like growth.


It credited the opening of new stores and improved trading, in the eurozone particularly, and said higher profit forecasts were mainly the result of not having to cut margins as aggressively as previously predicted.


But shares in its parent company, Associated British Foods (ABF), were down 4.2% by market close.
George Salmon, equity analyst at Hargreaves Lansdown, said continued headwinds for the company's sugar business were the biggest factor.


He said: "The sugar business has been struggling in recent times, and unfortunately there's no sign of a let up.


"Lower EU prices and a supply glut mean profits look even weaker than previously thought.


"Obviously shareholders would want ABF to be firing on all cylinders, but given the sprawling nature of the business, that's not always possible.
 
 
"With that in mind, investors should try and keep their focus on the main factor. At ABF, that's Primark. Trading in Europe is notably stronger, which, combined with tight stock management and favourable exchange rate movements, is helping profitability improve."




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