Primark shores up ABF earnings

Associated British Foods remains on track to deliver flat earnings this financial year as rising sales at its Primark discount clothing chain offset pressure on profit margins from higher cotton prices.

The food and retail group, which markets Silver Spoon sugar, Mazola vegetable oil, Ovaltine drinks and Twining tea, said on Thursday sales from continuing operations rose seven per cent in the 16 weeks to 25 June, its fiscal third quarter.

That signalled a slowdown from the first half, with revenues up nine per cent for the 40 weeks to 25 June.

However, revenue growth at Primark picked up to 15 per cent in the third quarter, and was up 13 per cent over the 40 weeks.

"Trading for the group since the half year remains on track to deliver adjusted earnings for the full year similar to last year's very strong result," AB Foods said.

In April, the group cut its full-year earnings forecast to a flat outturn after deciding to absorb most of the rise in costs of raw materials, like cotton, at Primark and as it saw higher costs from processing sugar beet in Britain.

The company said it was a strategic move to cut margins at Primark to reinforce its low-price credentials with shoppers struggling with rising prices and austerity measures.