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Primark profit could top forecast after robust post-lockdown trading

LONDON (Reuters) - Associated British Foods ABF.L on Monday forecast full-year profit for its Primark fashion chain "at least at the top end" of previous guidance after post-coronavirus lockdown trading exceeded its expectations.

FILE PHOTO: Signage is displayed outside a Primark store at the Oxford Street, in London, Britain July 2, 2020. REUTERS/Hannah McKay

Core earnings for the group as a whole for the year to Sept. 12 were, however, forecast to be “significantly below” 2018-19. The hit to Primark’s profit when its stores across Europe were closed is seen outweighing a “very strong” increase in profits for its sugar, grocery, agriculture and ingredients businesses.

Shares in AB Foods, majority owned by the family of CEO George Weston, were up 3.2% at 0843 GMT.

In July the group forecast full year adjusted operating profit for Primark in a range of 300-350 million pounds ($396-$462 million), down from 913 million pounds the previous year.

Following the lockdowns, all Primark stores reopened during May, June and July, and trading during the fourth quarter has been strong, the group said.

AB Foods finance chief John Bason highlighted the latest four-week UK market data for sales in all channels, including online, which Primark does not have. The data showed Primark achieved its highest ever value and volume shares for this time of year.

“If there were any fears about Primark coming back having been closed for three months, my goodness this (update) scotches it,” he told Reuters.

Primark expects UK sales since reopening to be 12% lower on a like-for-like basis, with Europe and the United States down 17% and 9% respectively on the same basis.

It also forecast a “significant reduction” in a 284 million pounds exceptional charge flagged in April against surplus inventory.

AB Foods said fourth quarter trading in its food businesses also exceeded expectations.

Its grocery division, whose brands include Kingsmill bread, Twinings tea, Ovaltine and Jordans cereal, benefited from increased sales in its key markets of the United States, Europe and Australia.

The ingredients division benefited from increased demand for yeast and bakery ingredients, particularly across the Americas and China.

Reporting by James Davey; Editing by Jan Harvey and Emelia Sithole-Matarise