Primark continues to be star player

Primark's new store at the Trinity Leeds Shopping Centre. Picture by Simon Hulme

Primark, which reported like-for-like sales growth up 4.5 per cent, has benefited during the downturn thanks to its low prices and keen eye for the latest fashion trends.

The performance helped the conglomerate offset sharply lower sales in its sugar division and the impact of the pound’s recent strength on overseas earnings.

As well as Primark’s continued progress, ABF has been cheered by good growth in its grocery division after strong demand from green tea drinkers helped Twinings Ovaltine post double-digit sales growth in the year to September 13.

The division’s Allied Bakeries arm also grew revenues and profits after the launch of Kingsmill Great White boosted market share.

Primark, which has 20 stores across Yorkshire, has been the jewel in the crown at ABF for a number of years, leading to a Europe-wide estate of 278 stores and 10.2 million sq ft of space.

In the last financial year, Primark opened 1.4 million sq ft of selling space in 28 new stores, the most recent being in Berlin and Bath.

“We have a very strong pipeline of new stores in Europe extending over a number of years,” the company said in a trading update.

ABF said early sales of its new autumn/winter range were encouraging, although shareholders had been hoping for an even better performance than the 4.5 per cent increase in underlying sales.

Investors were also rattled by the continued impact of falling prices on its sugar division.

Revenues and adjusted operating profit for AB Sugar will be substantially lower than last year, with lower volumes in north China and a currency translation impact of some £20m also to blame.

The decline in prices reflects the end of EU sugar quotas in 2017, although the speed of adjustment has been faster than the company expected.

British Sugar produced 1.32 million tonnes of sugar compared with 1.15 million tonnes a year earlier.

Good growing conditions extending into the mild winter resulted in a higher beet yield and sugar content than last year.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said: “Sales at Primark look to have fallen short of high investor expectations, whilst lower sugar prices, not helped by previous European Commission initiatives, continue to weigh. Furthermore the strength in sterling has also impacted negatively.

“More favourably, Primark still continues to grow, driven by new store openings and cost conscious consumers. Europe and Spain in particular have played their part, whilst management’s focus on improving efficiency through larger warehouses and improved store rental terms has also contributed.

“Away from Primark, expanding tea sales in the US have helped performance at its grocery division. Ongoing group cash generation is aiding the reduction in overall company debt.”