Primark warns of tough trading in run-up to Christmas

The owner of value fashion retailer Primark has warned of challenging trading in the run-up to Christmas – but says it expects earnings outlook remains unchanged.

Associated British Foods (ABF) chairman Michael McLintock is expected to say at the firm’s annual general meeting today (7 December) that Primark faced a “tough retail market” during November. The news sent AB Foods share price down over 2% this-morning.

It also comes at a time of real turbulence for the UK high street, which is already under pressure. This year has already seen the collapse of Toys R Us, and rescue deals for chains such as House of Fraser.

Despite the challenges, McLintock says that with careful inventory management and improved margins, its expectations for an increase in Primark profit is unchanged. “At this early stage in our new financial year, sales and profit for the first eight weeks of trading for the group were in-line with expectations,” he adds.

In its last financial year ended 15 September, Primark saw sales grow 6% to GBP7.47bn (US$9.52bn), although this was offset by a like-for-like sales decline of 2.1% due to “unseasonable weather,” especially in the eurozone.

Primark’s selling space expansion is expected to continue, and McLintock says the company is expecting an increase in retail profit for the year. The retail chain is now trading from 364 stores and a total selling space of 15.1m sq ft.

“At current exchange rates we expect no material translation or transactional effect on profit but the sterling exchange rate can be expected to be volatile given a period of intense Brexit negotiations,” he adds.

“Taking all of these factors into account, at this early stage, we still expect adjusted earnings per share for the group for this financial year to be in line with the 2018 financial year.”