Primark owner ABF warns over weaker profits

The owner of high street clothing firm Primark has warned of a profit dip and pressure from gas prices on its sugar arm.

Associated British Foods says trading has been “resilient” over the latest quarter, despite “challenging” retail conditions in most markets.

The update came as the group prepares to spin off Primark by the end of next year.

The group revealed revenues grew by three per cent to £5.3 billion for the quarter to June 20, compared with the same period a year earlier.

ABF said it is on track to deliver adjusted pre-tax profits, which will be below the level reported last year.

The group’s retail arm, which is predominantly Primark, saw revenues lift four per cent year-on-year to £2.92 billion.

New store openings continued to drive growth, with like-for-like sales dipping by 2.2 per cent.

Primark reported UK sales were up one per cent for the period, with flat like-for-like growth.

It saw a “strong start” to spring/summer trading in March, but said this was followed by a weaker performance in April and May.

The retailer said this was linked to the impact of the Middle East conflict on consumer sentiment and unseasonable weather.

However, it said improved weather conditions in June helped drive stronger trading.

Elsewhere, revenues from the firm’s grocery arm, which owns Twinings and Ryvita, grew by one per cent for the quarter, with growth across a range of brands partly offset by lower oils sales in the US.

In sugar, ABF revealed a four per cent drop in revenues, linked to a decline in selling prices in Europe.

The company also warned “gas costs are significantly higher due to the Middle East conflict”, predicting this will lead to a “further deterioration” in profits next year.

George Weston, chief executive, said: “In sugar, the duration and severity of the Middle East conflict has increased gas price expectations for next year, which has impacted our European profit outlook.

“Aside from sugar, our full-year outlook for the group is unchanged.

“Across the group, we continued to take targeted actions and make investments to drive performance.

“Several long-running projects have either recently been completed or are nearing completion, reinforcing our confidence in the group’s long-term growth prospects.”

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