20th Jan 2022 14:01
(Alliance News) -Â Associated British Foods PLC's Primark sales remain below pre-virus levels, a trading update on Thursday showed, but the low-cost fashion outlet appears to have held up well against the Omicron wave of Covid-19.
For the 16 weeks ended January 8, AB Foods's total sales grew 16% to GBP5.57 billion from GBP4.80 billion the same period a year before.
Nearly all of the group's segments delivered growth in the period, with its Retail arm - which houses low-cost clothing chain Primark - showing the highest rate with a 32% rise to GBP2.67 billion. This was due to a gradual improvement in footfall and the reopening of stores, which were mostly shut in the prior period.
However, total Primark sales were 5% lower than pre-Covid levels and like-for-like sales were 11% below.
"Primark-owner ABF's diversified business offered a safety net throughout the pandemic, but as things normalise all eyes are on retail for signs of a comeback. Compared to last year, when store closures kept sales painfully low, revenue rose considerably. But sales at Primark have yet to make their way to pre-pandemic levels," observed Hargreaves Lansdown's Laura Hoy.
Shares in AB Foods were down 3.1% at 2,064.00 pence in London on Thursday. The stock has fallen 10% over the past 12 months, underperforming the wider FTSE 100 index which has gained 13%.
Like-for-like sales from Primark's UK retail stores were down 10% from the same period in its 2020 financial year, while like-for-like sales in Continental Europe suffered a 14% drop over a two-year gap, as Omicron hampered footfall.
AB Foods said trading in the UK in the period was hit by fewer shoppers pounding the high streets due to the Omicron variant, but this has improved in recent weeks.
As Primark has no online presence, footfall is crucial to the pure-play bricks-and-mortar retailer.
Jefferies said the Omicron hit was less severe than feared and hopefully marks the "last Covid-related deterioration in sales momentum".
"Past periods of reduced restrictions have shown Primark's ability to defend strong consumer attractions and double-digit margins," said Jefferies analysts.
And positively, AB Foods said Primark's margins have held up well. Retail's operating profit margin was ahead of expectations and is expected to be over 10% at the half-year as inflationary pressures were broadly mitigated by a favourable dollar exchange rate and a drop in store operating costs.
Consensus places Primark's half-year margins at around 11%, with UBS sitting slightly higher than this at 12%.
For the first half of the previous financial year, the retail adjusted margin was just 1.9%, plummeting from 11.9% the year before, which was untouched by the pandemic.
Looking ahead, AB Foods has left its outlook unchanged, and continues to expect significant progress in adjusted operating profit for both the interim and annual period.
With UK Prime Minister Boris Johnson on Wednesday saying Plan B measures aimed at tackling the spread of Covid-19 are to be dropped across England, Primark will be hoping to see an uptick in shoppers in the coming weeks.
"It is difficult to predict future trading conditions with certainty, but we have seen an encouraging improvement in footfall in the UK and Ireland as the disruption from Omicron reduces. Looking ahead, we expect Primark sales from now to April to be significantly better than sales in the comparable period in the last financial year, when the estate was largely closed," said AB Foods.
By Lucy Heming;Â [email protected]
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