(Alliance News) - Associated British Foods PLC on Thursday reported a sales rise at its Primark high street retail business over the recent 16-week period which included the vital Christmas trading spell.
Elsewhere, the period to January 4 saw sales rises in the Sugar unit, the Ingredients unit and revenue climbed in the agriculture business. The laggard, AB Foods said, was its Grocery unit, which saw sales level with last year.
On its full-year guidance, AB Foods said: "Our outlook for the group is unchanged, with progress expected, on both a reported and an IFRS 16 adjusted basis, in adjusted earnings per share for the year."
IFRS 16 is an accounting standard governing the financial treatment of leases.
Primark sales were up 3.0% year-on-year, or 4.5% higher at constant currency. AB Foods largely attributed this to an increase in Primark's selling space.
In the UK alone however, there was a mixed picture. Primark sales rose 4.0% year-on-year, again due to more trading space, though on a like-for-like basis there was a "marginal decline".
UK trading in November and December, which includes both Christmas and Black Friday - where retailers offer a spate of discounts - "was particularly good" however, AB Foods said.
The company reported an improvement in like-for-like sales across the whole Primark group, but didn't provide exact figures for this. It explained its European markets were the main growth driver, though there also was a like-for-like improvement in the US.
AB Foods added: "As expected, operating profit margin in the period decreased, with the effect of purchases contracted at a stronger US dollar exchange rate than last year but partially mitigated by cost reductions in both the cost of goods and overheads."
Since its financial year end on November 14, retail selling space grew by 200,000 square feet. At January 4, Primark had 15.8 million square feet, up from 15.1 million square feet the year before.
Looking ahead, AB Foods looks set to add even more trading space for Primark, bucking the trend among other UK retailers, many of which have resorted to taking company voluntary agreements, an insolvency arrangement.
In November, shopping centre owner intu Properties PLC said it was hurt by such agreements being made at UK-based Monsoon Accessorize and Topshop-owner Arcadia Group Ltd.
AB Foods said: "We now expect to add a net 900,000 square feet of additional selling space in this financial year. We expect to open 18 new stores together with a number of relocations and selling space will be reduced in a further store in Germany. As previously announced, we will enter the Polish market with a new store in Warsaw in spring 2020, followed by a store in Prague, Czech Republic. We have now also signed leases for a further store in Poland, in Poznan, and for our first store in Slovakia, in Bratislava which will take Primark to its fifteenth country."
An increase in European Union sugar prices helped AB Sugar revenue climb 5% year-on-year, or 7% at constant currency.
"EU sugar prices have remained at levels higher than last year and our UK and Spanish businesses have now substantially completed contracting sales for this financial year. This, combined with reductions in the costs of sugar production, will deliver a material improvement in our Sugar profit this year, weighted to the second half. UK sugar production is expected to be 1.18 million tonnes, up on last year with an improvement in beet yield more than offsetting the reduction in crop area," AB Foods explained.
In the Grocery unit, which contains Kingsmill, the bakery products chain and the Silver Spoon sugar brand, sales were flat year-on-year though margins improved.
AB Foods said: "Sales growth in Twinings was driven in particular by herbal teas in the UK and the US, although Ovaltine sales were held back by a slow start in Thailand. Margin benefited from the tea supply chain efficiencies delivered last year. At Allied Bakeries, the operating loss was reduced with progress from cost reductions more than offsetting the loss of contribution from lower sales."
Elsewhere, AB Agri, the agriculture unit, had a 10% year-on-year revenue climb and the company's Ingredients unit posted a 1% sales rise, or 3% at constant currency.
Shares in the company were 2.9% higher at 2,630.00 pence each in London on Thrusday morning, making it the best performing FTSE 100 stock.
By Eric Cunha; ericcunha@alliancenews.com
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