British Sugar owner expects lower sugar prices to drag on profits
Archant Norfolk 2017
Primark owner Associated British Foods (AB Foods) has warned it will take a £20m hit due to the stronger pound.
Although the group’s full year outlook is unchanged, unfavourable exchange rates are expected to drag on “progress” in adjusted operating profits and adjusted earnings.
In a trading update on Monday the group, which also owns British Sugar, said that with two thirds of its operating profit earned outside the EU, “the strengthening of sterling against most of our trading currencies, other than the euro, will result in a loss on translation this year”.
The company said performance from segments including its Primark retail division would help take the edge off more muted progress in its sugar unit, which has been adversely affected by lower EU sugar prices.
Full year sales at Primark are expected to rise 5.5% on a constant currency basis, driven by increased selling space, but offset by a 2% decline in like-for-like sales.
At actual exchange rates, sales at Primark are expected to rise 6%.
However, like–for–like sales for the clothing retailer as a whole were “held back” by a drop in northern Europe where unseasonable weather led to tough trading conditions.
It said sales in Northern Europe were still well ahead of last year thanks again to increased selling space.
“Early trading of the new autumn/winter range has been encouraging,” AB Foods added.
Store selling space for Primark grew by 900,000 sq ft this year, following 15 new store openings that brought the total estate to 360 stores.
It included five stores in Germany, four in the UK, two in France and one each in Portugal, Belgium, Spain, Netherlands and the US.
That was amid the closure of a small store in Lisnagelvin, Londonderry, in Northern Ireland, while selling space at its US stores in Freehold and Danbury was reduced.
AB Foods will release its full year results covering the year to September 15 on November 6.