Primark (LSE: ABF) 9M18 Trading Update: Improved Comparable Sales Driven by Better Trading in the Eurozone

KEY POINTS

  • Associated British Foods (ABF) reported its 9M18 trading statement for the 40 weeks ended June 23, 2018. This report focuses on Primark, the company’s retail division.
  • In its 9M18 update, Primark reported a year-over-year revenue increase of 7% and an increase of 6% at constant currency.
  • Primark has expanded its selling space by 0.8 million square feet since the beginning of the fiscal year.
  • For FY18, management expects improvement in Primark’s margins to result in higher profit growth.

9M18 Trading Update

British conglomerate ABF reported its 9M18 trading statement for the 40 weeks ended June 23, 2018. This report focuses on Primark, the company’s retail division.

Sales

Primark reported a year-over-year revenue increase of 7% for the 9M18 period and an increase of 6% at constant currency. A later phasing of space growth led to marginally lower growth compared with the first half of the year.

Primark reported stronger comparable sales growth in the third quarter than for 1H18, owing to better trading across the eurozone. ABF stated that Primark “performed well” in the UK and delivered growth in comparable sales. While total UK sales growth during the quarter was higher than that reported for the same period last year, it slowed from the first half. 

Selling Space

Primark has expanded its selling space by 0.8 million square feet since the beginning of this financial year; the company added 0.4 million square feet in the third quarter alone. As of June 23, Primark operated 14.7 million square feet of selling space across a total of 358 stores.

New Stores

During the third quarter, the company opened seven new stores across Germany, Belgium, Spain, the Netherlands and the UK.

Outlook

The company expects to add 0.1 million square feet of space in the fourth quarter, which would take the total increase in new space to 0.9 million square feet in FY18. That figure is lower than the 1.2 million square feet the company initially planned to add this fiscal year.

Management expects Primark’s operating margin for the second half to be higher than the 9.8% recorded in the first half. ABF anticipates that stringent inventory management and better-than-expected markdowns will lead to higher second-half profit for Primark than previously expected.

For the full fiscal year, management expects improvement in Primark’s margins to lead to higher profit growth.

At the group level, management maintained its full-year outlook. The company expects progress in both adjusted operating profit and adjusted EPS.

ABF will report its full-year results on November 6, 2018.