Primark says sales recovering after cool spring cuts growth

London

BUDGET fashion retailer Primark, owned by Associated British (AB) Foods, said sales bounced back after a soggy May kept shoppers out of stores.

The company forecast a higher operating margin this year at the unit, which has been reducing markdowns and benefited from a weaker US dollar that makes it cheaper to source garments from Asia.

Low-cost fashion chains such as Hennes & Mauritz have been trying to sell more garments at full price after increasing competition eroded margins in the industry.

Primark is driving sales growth by expanding new stores at a breakneck pace, while comparable sales at existing shops fell.

AB Foods shares were little changed in London on Thursday morning. They have gained 20 per cent since the start of the year.

Primark sales rose 4 per cent for the first three quarters of the year, and its margin widened to 11.7 per cent in the first half from 9.8 per cent in the year-earlier period. AB Foods said it expects better purchasing and fewer discounts to help offset a recent recovery in the dollar in the second half.

Finance Director John Bason said: "For the months from March to June, there's no doubt the UK consumer environment has been softer. Primark continues to outperform that, but we have also seen a bit of softness." He expects a stronger July due to the improving weather.

Last year had "the feel-good factor" with the hot weather, the royal wedding and soccer World Cup, which boosted sales for Primark and other retailers, he said.

Primark said a new outlet in Birmingham in England - its biggest to date - is showing positive early results. Outfitted with "trend rooms" that showcase the latest looks as well as Harry Potter and Disney areas, it's designed to be a concept store for the future. The retailer also signed a contract to open a store in Chicago, which analysts said may herald more expansion in the US Midwest.

Mr Bason said the decision to expand in the US was based on strong sales at a store in Brooklyn that Primark opened last year.

The company's sugar business is showing recovery after it was hurt by weak pricing. AB Foods said it expected further stabilisation through the end of the year. BLOOMBERG