Primark’s market share hit a record high of 7.1% in December, despite early difficulties due to an unusually warm winter.
Associated British Foods (ABF), owner of retail chain Primark, has published a positive trading update for the 16 weeks to 6 January.
The group’s food division recorded turnover of £1,414 million (1,654 euros) in the period, with ingredients accounting for £698 million (816 euros). Revenue from agriculture for the same 16 weeks brought in £572m (€669m), while sugar added its value added to the figures with a turnover of £825m (€965m). Retail, however, outperformed all other departments by achieving a huge turnover of £3,376 million (€3,948 million).
Primark and Ingredients drive revenues
The group’s US-focused brands performed exceptionally well, along with international brands, such as Twinings. Although Ovaltine has performed reasonably well in Western Europe, there have been some obstacles in Asia.
AB Mauri, the yeast and baking ingredients division of ABF, also reported good profits and sales increases. However, the reduction of inventories by customers has also affected other sectors of the Ingredients sector. Agricultural sales remained mostly poor.
Currency and production hurdles hamper southern Africa’s sugar arm, Illovo. Vivergo, ABF’s biofuels company, also posted mixed results over the period. However, overall sugar production is expected to be considerably higher than last year, even in the face of adverse weather conditions, the company said.
Primark saw sales rise 7.9% in the 16 weeks, with the retail chain increasing its market share to a new high of 7.1% in the 12 weeks to 10 December. This is 0.1% more than in 2022, despite warmer weather this winter and the late start of holiday sales.
Men’s and women’s clothing, as well as leisure, performance clothing and the Rita Ora collection recorded decidedly positive results, although the categories dedicated to cold weather recorded a late start, which recovered as progress of winter.
Primark’s total UK sales for the 16 weeks grew by 4.5%, while Primark’s sales in Europe excluding the UK increased by 9.1%. However, economic conditions in some European countries affected local performance. Sales in the United States increased by 45%, thanks to the opening of several new stores.
Primark also continued to expand during this period, with three new stores in the US, one in Poland, three in France and one in Spain.
ABF is reasonably confident about next year’s profitability
Regarding the Red Sea crisis, ABF’s trading statement highlights: “We continue to monitor the situation in the Red Sea but at this stage we do not anticipate any significant disruption to our supply chain.”
Looking ahead, ABF said: “We continue to look forward to a year of significant progress in both profitability and cash generation, with the improvement in profitability driven by a recovery in the Primark margin, a marked improvement in the profitability of British Sugar and the reduction of losses in Vivergo.
“We also feel more confident in Primark’s adjusted operating margin delivery this financial year, driven by further improvement in product gross margin. This should insulate us well from potential additional supply costs due to the Red Sea disruption, should they arise .”