Primark sticks to plan for expansion in Europe and US

Primark owner, Associated British Foods (ABF), is sticking with its plans to expand the discount clothing retailer across Europe and the US despite market and currency uncertainty since Britain’s vote to leave the EU.

In the year to date, Dublin-headquartered Primark — which trades here as Penneys — has seen sales rise by 7%, year-on-year in constant currency terms.

That increase has mainly been driven by increased selling space as the retailer continues its European expansion and makes its first foray into the US market.

ABF said that while sterling has weakened, it should still see translation benefits this financial year if current exchange rates remain unchanged.

As a group ABF saw revenue rise by 3% in the 40 weeks to June 18.

“In our next financial year, these rates would have both positive and negative effects on profits. There would be an adverse transactional effect on the profit margin on Primark’s UK sales, currently half of its turnover.”

“Primark operates discrete supply chains for its stores in each of the UK, US and eurozone. We undertake relatively little cross-border trading between the UK and the rest of the EU. We have a strong balance sheet and we remain optimistic for the group’s continued growth, particularly with our plans for Primark’s expansion, which remain unchanged,” ABF said.

“While full-year earnings per share guidance has modestly improved, the implications of weaker Primark like-for-like trends and sterling weakness on Primark’s sourcing costs cast a shadow on 2017 growth assumptions,” said Jack Gorman of Davy Stockbrokers.