London, United Kingdom – Associated British Foods on Monday forecast full-year gains for its Primark fashion chain “at least at the top” of previous guidelines after the lockdown trade after the coronavirus exceeded expectations.
However, core earnings for the group as a whole for the year to September 12 were predicted to be “significantly below” 2018-19. The blow to Primark’s earnings when its stores across Europe closed outweighs the “very strong” profit gains for its sugar, grocery, agriculture and ingredients businesses.
Shares in AB Foods, majority owned by the family of Chief Executive George Weston, rose 3.2 percent at 08.43 GMT.
In July, the group forecasted adjusted operating profit for Primark for the full year in the range of £ 300-350 million ($ 396- $ 462 million), down from £ 913 million the previous year.
After the lockdowns, all Primark stores reopened in May, June and July and business was strong in the fourth quarter, the group said.
John Bason, AB Foods chief of finance, highlighted the last four weeks of UK market data for sales across all channels, including online, that Primark does not have. The data showed that Primark achieved its highest value and volume shares ever for this time of the year.
“If there was any fear that Primark would return after being closed for three months, my goodness, this (update) puts it away,” he told Reuters.
Primark expects UK sales to be down 12 percent on a comparable basis since reopening, with Europe and the United States down 17 percent and 9 percent respectively on the same basis.
It also predicted a “significant cut” in an exceptional charge of £ 284 million marked against excess inventories in April.
AB Foods said trading in its food business in the fourth quarter also exceeded expectations.
The grocery division, which includes Kingsmill bread, Twinings tea, Ovaltine and Jordans cereal, benefited from higher sales in key markets in the United States, Europe and Australia.
The ingredients division benefited from the increased demand for yeast and bakery ingredients, particularly in America and China.
By James Davey; editors: Jan Harvey and Emelia Sithole-Matarise