• FY operating profit down 8% to GBP309m
  • Revenues up 13% to GBP3.043bn
  • Like-for-like sales up 3%

Value-led clothing retailer Primark recorded an 8% reduction in full-year operating profit as parent company Associated British Foods (ABF) sacrificed margin to grow market share.

The company said the 3% increase in like-for-like sales in the year to 17 September demonstrated the success of its strategy of maintaining its value position on the high street, while absorbing increased costs related to cotton price hikes and VAT.

ABF financial director John Bason defended Primark's 10.2% margin decline over the year. "Primark made a conscious decision to forgo profitability to maintain its position as offering the best bargains on the high street", he said.

However, some of these cost pressures were now reducing, the company said.

Meanwhile, ABF said its experience with Primark in continental Europe was “encouraging, both in terms of strong consumer demand and selling space expansion”, and gave the company confidence for future growth.

"We are looking at European stores in Germany as soon as stores become available. Holland is an excellent market and Belgium is significant. We also don't have a high street unit in Spain, we are only in shopping centres. Whether we enter new markets depends on the rate at which we can find space in existing markets. It would be much safer to grow first in existing markets where we have good infrastructure, rather than create infrastructure in new markets," said Bason.

"However, we are open to future opportunities in Europe," he added.

Primark’s revenue growth helped ABF group revenues to rise 9% to GBP11.1bn (US$17.8bn), while adjusted pre-tax profits edged up 1% to GBP835m.

Discussing the group results, ABF chief executive George Weston said: “Further substantial investment saw the completion of a number of major capital projects and a sizeable increase in the Primark estate.

“Opportunities for further investment are exciting, particularly in Primark, and the strength of the group balance sheet and a strong cash flow will enable us to pursue them with confidence.”