Primark's "excellent" Christmas bolsters AB Foods

Primark has come in, as expected, as a winner over Christmas - proof that cheaper products can keep value in bricks and mortar.

The budget high street store saw "excellent Christmas trading" as consumers continued to flock to its stores. Sales jumped 14 per cent at actual rates (12 per cent at constant rates) in the 16 weeks to 4 January, according to owner Associated British Foods.

Unseasonably warm weather held back growth for the retailer in the first 8 weeks of the period, but this was compensated for by the run-up to Christmas.

Festive period growth was driven by an eight per cent increase in selling space and higher sales densities in new stores, said AB Foods.

The store's operating profit margin was higher than a year earlier, and higher than expected.

Primark opened 14 new stores in the period - taking its total to 268 - including its first in France, which is in Marseille.

But aside from growth engine Primark, AB Foods' grocery division, which includes brands such as Twinings, Ryvita and Silver Spoon, had a less stellar period.

A weaker Australian dollar saw revenue down one per cent (at actual rates), although brands Twinings and Ovaltine saw strong demand in the UK and US.

However, the group said that sugar performance was weaker than expected. Lower prices, ahead of EU regime reform in 2017, has, it said, hit business, and the impact on profit will be greater than the "substantial reduction" it already anticipated.

From the statement:

Sales at Silver Spoon declined as a result of lost contracts and reduced UK sugar pricing but the profit impact has been partially mitigated by overhead cost reduction.

Given that, AB Foods expects adjusted earnings per share for the current financial year to be similar to 2013.