UK: Primark H1 profits up 10%, but margins under pressure
Discount clothing chain Primark posted a 10% rise in first-half profits, but warned that rising overheads and currency effects would hit margins for the rest of the year.
The retailer, owned by Associated British Foods (ABF), recorded an 18% increase in revenues to GBP1.065bn (US$1.548bn), thanks to Christmas trading ahead of its expectations and a 5% rise in like-for-like sales.
Profits were up 10% to GBP122m, helping ABF as a whole to an adjusted pre-tax profit of GBP275m, down 2% - described by chief executive George Weston as "a reassuring set of results".
However, the company said the cost of the new distribution centre at Thrapston, UK, had increased fixed overheads for Primark.
"This is reflected in a lower operating profit margin than last year," said ABF. "Margins in the second half will also see some effect from the weakness of sterling against the US dollar, as many of Primark's garments are sourced in dollars."
However, the company added that this would be offset by lower supplier prices and freight costs.
Primark expects to open a further seven stores in the second half of the year, including two stores in Spain and the company's first outlets in Germany and Portugal.
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