By Ravender Sembhy/ Easter Daily Press
Primark owner Associated British Foods (ABF) has said that full-year sales at the retail chain have taken a hit from unseasonable weather, adding that currency movements following Britain’s decision to quit the European Union will have both positive and negative repercussions for the group.
ABF said that like-for-like sales at Primark are expected to fall by 2% over the year as warm pre-Christmas weather and a “very cold” March and April dampened its performance.
However, the fashion chain still expects overall annual sales to be 9% ahead of last year, driven by a 9% increase in selling space, which saw a net addition of 22 stores, bringing the estate up to 315 shops.
ABF said that the collapse in sterling against the dollar since the Brexit vote will have “no effect” on Primark this year because of the firm’s practice of taking out forward currency contracts. However, it warned that its margins will be squeezed as a result of a weaker pound.
“The transactional impact on Primark’s margins from the weakening of sterling against the US dollar, particularly since the EU referendum, will have no effect in this financial year as a result of our practice of taking out forward currency contracts when garment purchase orders are placed.
“However, at current exchange rates, margin will be adversely affected in the new financial year,” it said.
The company added that, as a result of the weaker pound, there would be a favourable effect on profit margins at its sugar operations and on profits earned outside the UK.
ABF added that across its businesses it expected group operating profit to be ahead of last year, partly due to the weakness of sterling.