Primark eyes faster profit growth

Primark bagsPrimark has continued to resist the pressures of the economic downturn as it revealed robust sales and predicted healthier profit growth in the months ahead.

The chain, which is owned by Associated British Foods, saw like-for-like sales in the six months to March 3 increase 2%, with total revenues up 15% at £1.6 billion.
Primark, which has 233 stores in the UK and across Europe, will enjoy a faster rate of profit growth in the months ahead due to new stores and lower cotton prices, AB Foods said.

AB Foods - the owner of a sugar business and household brands including Kingsmill bread, Twinings and Ovaltine - reported a 3% rise in adjusted pre-tax profits to £363 million as revenues increased 11% to £5.8 billion.

The grocery arm saw revenues increase 4% to £1.8 billion, while operating profits declined 30% to £75 million, driven by restructuring costs at its Australian business George Weston Foods.

Kingsmill maker Allied Bakeries saw its margins squeezed in the first half as it rolled out a high level of promotions to draw in cash-strapped consumers. AB Foods said it "refreshed" the Kingsmill brand in January with a new package design and television advertising campaign, featuring its 50/50 bread and Little Big Loaf Tasty Wholemeal.

Twinings Ovaltine performed well with good tea sales in the US and strong growth for Ovaltine in developing markets, AB Foods said. The group said marketing investment for the label was increased this year, particularly in the UK.

The grocery division also owns the Silver Spoon sugar brand, which saw growth in caster and icing sugar sales for home baking. AB Sugar saw a huge 60% leap in operating profits to £172 million as "excellent" conditions saw strong sugar beet yields of 75.6 tonnes per hectare.

Primark saw slow trading at the start of the financial year as a result of the unusually warm autumn, but sales picked up over the Christmas period and have continued to do so into the New Year.

The chain saw its profit margins squeezed in the first half as it absorbed higher costs and decided not to pass them on to consumers. However, cotton prices have since fallen and the store is now beginning to see the benefit of lower input costs in the second half.
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