Primark has today been pinned as next year's source of growth for its owner Associated British Foods (ABF), which is looking to fill a gap left by falling profits from its sugar arm.
ABF is hoping that expansion of Primark’s selling space will help deliver expected earnings per share next year, in a bid to compensate for bleak forecasts levied at the conglomerate's under-pressure sugar business.
Yet Primark, which makes roughly 60 per cent of ABF's profit, said this morning that sales fell 2.1 per cent in the year to mid-September, blaming three periods of unseasonable weather for the annual decline.
However, in the UK like-for-like sales rose 1.2 per cent and the chain claimed a "significantly" bigger share of the clothing market.
ABF boss George Weston said that strong returns at Primark and the grocery, agriculture and ingredients businesses more than offset the decline in profits from sugar, which has been hit by lower prices on the back of increased oversupply.
Profits are now projected to be "significantly lower" at the company’s AB Sugar division.
The company also said it would pay an annual dividend of 45p, marking a 10 per cent rise from the previous year.
Emma-Lou Montgomery, associate director from Fidelity Personal Investing’s share dealing service said: "Associated British Foods has hit the sweet spot for investors again. Not with its sugar business but with fast-fashion brand Primark, whose performance has more than compensated for the fall in profits in its sugar business as a result of the deregulation of the EU sugar market.
"Primark has delivered its most significant profit growth in recent years and that’s especially sweet in a retail sector that has soured for so many other retailers. For many that 10 per cent rise in the annual dividend for shareholders will just be the icing on the cake."
ABF's share price rose just under two per cent in early morning trading.