Penneys owner raises profit outlook as sales show resilience

Sales were driven by shoppers buying more seasonal clothing and health and beauty products.

Penneys owner Associated British Foods on Monday raised its profit outlook for the 2022/23 year as its low-cost fashion business benefited from strong demand for summer ranges in its latest quarter.

Consumers across Europe have defied expectations of a slowdown as spending power is squeezed by high inflation.

Last week rival Next, raised its sales and profit guidance for the year, saying trading had exceeded expectations on the back of warmer weather and consumers' wage increases.

Earlier this month, Zara owner Inditex, reported a strong start to summer, while H&M reported a strong start to June.

AB Foods, which also owns major sugar, grocery, agriculture and ingredients businesses, said it now expected full-year adjusted operating profit, its key profit measure, to be "moderately ahead" of the 1.435 billion pounds made in 2021/22.

It was previously forecasting an outcome broadly in line.

AB Foods said Primark, which Penneys trades as outside Ireland, saw a 13% jump in sales to £1.998 billion in the 12 weeks to May 27, its fiscal third quarter, which was driven by shoppers buying more seasonal clothing and health and beauty products, and from higher average selling prices. Like-for-like sales rose 7%.

It had forecast in April that like-for-like sales growth would moderate in its second half from the 10% achieved in the first half, saying it was cautious about the resilience of consumer spending in the face of an ongoing cost of living crisis.

UK households are in the midst of the biggest two-year squeeze in living standards since comparable records started in the 1950s, according to government forecasters. 

AB Foods, whose shares have risen 24% so far this year, said third-quarter sales in its grocery business, which includes Twinings tea, Jordans cereals and Ovaltine drinks, also rose 13%.

Reuters