The owner of the profitable clothing chain Primark will open another million square feet of new retail space in Europe next year, despite the worry that it will suffer from a volatile pound around the Brexit.
Sterling weakened considerably this summer, but Associated British Foods warned that a sudden strengthening of the pound would cost £ 20 million earlier this year.
The full-year sales at Primark are expected to increase by 5.5 percent based on constant exchange rates, thanks to the increased sales area, but offset by a 2 percent drop in like-for-like sales.
Primark has performed strongly this year (PA)
At current exchange rates, sales at Primark are expected to increase by 6 percent. It follows a strong performance in the UK, where its share in the clothing market has increased significantly & # 39;
That compensated for less good news in the food-oriented divisions of the diversified conglomerate, but it was a poor performance in the ABF sugar business that investors focused on, with the shares in the company dropping 3.3 percent in early trading.
Next year, AB Foods will be planting more than 1 million square feet of additional sales space for Primark, half of which will be added in the first six months. Most of the space is added in countries such as the UK, Germany, France and Spain.
Although the outlook for the entire year for the group remains unchanged – with & # 39; advancement & # 39; expected in adjusted corporate earnings and adjusted earnings per share – unfavorable exchange rates are expected to affect the results.
& # 39; With two-thirds of the group's operating results earned outside the UK, the strengthening of the pound sterling against most of our trading currencies, except the euro, will result in a loss this year. translation of about £ 20 million, & # 39; AB Foods said in a trading update on Monday.
The company said that the performance of segments, including the Primark retail division, would contribute to phasing out more moderate progress in its sugar unit.
"The strong profit performance this year from Primark, supermarket, agriculture and ingredients will more than offset the negative impact of lower EU sugar prices," the company said.
The annual turnover of Primark in the UK is now expected to rise by 6%, while the annual like-for-like growth is expected to be 1.5%.
As with similar sales for Primark as a whole, they were & # 39; stopped & # 39; by a decline in Northern Europe, where unusual weather led to difficult trading conditions. But it said sales in that area were still on the market last year, again thanks to the increased sales area.
"Early trading in the new fall / winter range was encouraging," AB Foods added.
Store sales for Primark grew 900,000 square meters this year, after 15 new store openings that brought the total estate to 360 stores.
It included five stores in Germany, four in the UK, two in France and one in Portugal, Belgium, Spain, the Netherlands and the US. This was due to the closure of a small store in Lisnagelvin, Londonderry, in Northern Ireland, while sales of space at the US stores in Freehold and Danbury were limited.
The company also gave an update on its store in the center of Belfast, which was destroyed by a fire last month. All employees and customers were evacuated safely and AB Foods said it was insured against the replacement costs of the building and the subsequent interruption of operations.
AB Foods will publish the annual results for the entire year until 15 September on 6 November.
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