ASSOCIATED British Foods said yesterday said it was on track to meet its full-year earnings targets as its budget clothing chain Primark helped to shore up its profit.
AB Foods, whose brands include Silver Spoon sugar, Mazola vegetable oil, Ovaltine drinks and Twinings tea, cut its full-year earnings forecast to a flat out-turn in April.
Sales growth at Primark accelerated to 15 per cent in the three months to 25 June, taking the increase to 13 per cent for the first three quarters of the year, the company said.
Meanwhile AB Foods said the sales growth was driven by both space growth and like-for-like improvements, and that the UK and Ireland achieved like-for-like growth despite the low level of consumer demand.
The company said that operating margins across its businesses in the second half had fallen due to higher input prices and Primark absorbing the VAT rise in the UK.
Six new Primark stores have opened since the half-year – three in the UK, two in Portugal and one in Spain.
The company now trades from 7.1m sq ft of space in 220 stores, and in September will open a 46,000 sq ft shop in Westfield Stratford.
In other parts of the business revenues dropped with the sugar business down in the quarter.
Meanwhile, prices rises, particularly cotton, have been taking their toll, with Primark struggling to keep prices down for its customers rather than pass on the burden.
“Price increases are still feeding through the system. A lot of the soft commodity prices have gone up,” finance director John Bason said.
After AB Foods announcement yesterday the company’s shares climbed to make it the top riser on the FTSE 100 in early trading as investors gave a positive reaction.