Penneys owner preparing for Ireland's corporate tax changes 

AB Foods said Penneys and Primark are not immune to the challenges of supply chain

The group, which also has major sugar, grocery, ingredients and agriculture operations, said it was seeing significant cost increases in energy, logistics and commodities. Picture: Larry Cummins

Penneys owner Associated British Foods forecast a significant increase in sales and profit at its fashion chain in its new financial year after the 2020-21 performance was dented by store closures due to the pandemic.

Penneys, which trades as Primark outside Ireland, said it expected sales to increase by at least the estimated £2bn (€2.34bn) that were lost to closures during the crisis, with its adjusted operating margin, recovering to over 10%. Revenue and profit fell 5% and 11% in 2020-21.

"Primark is not immune to the challenges of supply chain, raw material cost and labour rate inflation. However, we currently expect the impact of these to be broadly mitigated by the transaction currency gain arising from the weaker US dollar, improved store labour efficiency and lower operating costs," AB Foods said.

"Looking ahead beyond next year, we anticipate upward pressure on the effective tax rate due to the impact of corporation tax increases, notably the increase enacted in the UK, and the proposed increase recently announced in Ireland."

The group, which also has major sugar, grocery, ingredients and agriculture operations, said it was seeing significant cost increases in energy, logistics and commodities in addition to the impact of port congestion and road freight limitations.

It said it was working to offset the impact of these through cost savings.

Where necessary, its food businesses will also implement price increases, it said.

In the 53 weeks to September 18 the group made adjusted operating profit of £1.01bn (€1.18bn), both down 1%. It forecast "significant progress" in 2021-22 on both measures.

It will also pay a special dividend after its balance sheet and cash flow recovered from the hiatus of the pandemic.

Additional reporting Reuters