The owner of Primark said that full-year profits would be ahead of the company’s previous estimates as shoppers hunting for bargains flocked to its stores.
Associated British Foods, which owns Ryvita crackers and Dorset Cereals, said on Monday that operating profits would be in line with last year after it previously predicted they would decline.
“At Primark, our volumes and footfall have gone up,” said ABF’s chief financial officer John Bason. “People are very much looking for value whether it’s a jumper from Primark or food.”
Group sales should rise 16 per cent for the half year to March 4 after consumer spending “proved to be more resilient than anticipated”, the company said. It expects a similar sales increase at Primark to £4.2bn.
Bason warned, however, that the consumer outlook for the second half of the year remained uncertain.
“People are facing higher costs, interest rates have gone up and they’re facing higher energy bills,” he said. “We’re cautious about the rate of improvement.”
There were no further price rises planned at Primark after it previously passed on some costs to consumers, Bason said, but ABF would continue to increase prices in its grocery division in an effort to protect profit margins.
The group said its food business was boosted by strong sales of products, including bakery ingredients and cooking oils in the US.
Another growth area is higher consumer demand for “Wellness teas” such as herbal and green teas from Twinings. “Across all of our markets it is a massive consumer trend: people are being more aware of things in their diet,” Bason said. “Our volumes are increasing a lot and we have new ones coming.”
Primark opened 13 new stores in the period including its first in Romania and now has 419 outlets. It said its click-and-collect trial, which allows consumers to order children’s clothes to pick up in store, would continue.
Primark has long been a holdout against home delivery, claiming that its stores offer consumers a unique experience and allow it to safeguard its profit margin, which is now expected to be above 8 per cent.
The improvement in the fashion chain’s outlook comes as online cut-price clothing groups continue to struggle. Boohoo, for example, has lost close to half of its market value since February of last year. Meanwhile, high street retailers such as Next are reporting robust in-store sales.
Analysts at Credit Suisse hailed the stronger than expected trading results, noting that falling freight and energy costs would benefit the company, while wage inflation, currency fluctuations and input prices would remain a challenge.
The company’s share price rose by just over 1 per cent in London morning trading to 1,973p a share, which is up 21 per cent on the start of the year.