Value fashion retailer Primark said its sales and profit are expected to be well ahead of last year, benefiting from a stronger sterling.

Primark owner Associated British Foods said in a trading update today (13 September) that like-for-like sales growth of 6% was expected for the full year, driven by "a very strong performance in continental Europe and continued good growth in the UK".

Sterling’s relative strength against the US dollar in the first half benefited the cost of goods sourced in dollars and sold in the second half, easing the pressure on gross margins experienced earlier in the year, Primark said.

Economies of scale, as revenues increase, have also contributed to an improvement in operating margins in the second half and margins for the full year will be higher than last year.  Higher cotton prices and freight costs and the increase in VAT, implemented in Spain in July and planned for the UK in January, will put pressure on margins next year though, it added.

Primark expects to have opened eight new stores in the second half of the year, three in Spain, and five in the UK, and will bring its total number of stores to 204 by the year end.

Last month Primark entered into a conditional contract to lease a second store on London’s Oxford Street, occupation of which is expected by June next year with opening planned before Christmas 2011.

Furthermore, a 220,000 square foot freehold warehouse in Naas in Ireland is now operational and its former leased premises will be vacated at the end of 2010. The company's 200,000 square foot leasehold warehouse at Torija in Spain is also now operational, providing regional distribution capability for southern continental Europe, a statement added.