ABF says "unfavourable" UK weather to impact Primark's H2

Associated British Foods (ABF), parent company of Primark, expects revenue growth in the second half to be around 4 percent, driven by a strong sales contribution from the continued store expansion programme.

Like‐for‐like sales are expected to decrease by around 0.5 percent, with growth of 0.2 percent in the third quarter and a projected decline of around 0.9 percent in the fourth quarter reflecting unfavourable weather in the UK and Ireland, which resulted in lower footfall and particularly impacted sales of seasonal lines in womenswear and footwear.

Commenting on the second half trading update, George Weston, chief executive of Associated British Foods, said in a statement: “The group has continued to perform well in the second half, delivering good topline growth, a significant improvement in profitability and excellent cash generation. While the British weather was not in Primark’s favour this summer, robust growth in other markets and new store openings have driven good sales overall.”

Primark maintains operating profit outlook

The company said, overall, outlook for adjusted operating profit for Primark in FY24 is unchanged. Margin delivery has been strong in the second half and the company now expects adjusted operating profit margin for the full year to be a little over 11.5 percent.

The group expects Primark to deliver good sales growth in FY25 as it continues to execute the store rollout programme and product, digital and brand initiatives.

The company anticipates adjusted operating margin in FY25 to remain broadly in line with this year’s level.

Primark’s like-for-like sales expected to drop in the UK

In the UK, sales are expected to be around 0.5 percent lower in the second half of the year, with like‐for‐like sales expected to decrease by around 2 percent.

The like‐for‐like decline was 0.6 percent in the third quarter and is projected to be around 3.1 percent in the fourth quarter, with footfall impacted by challenging weather, particularly in April and June.

Primark’s market share decreased to 6.5 percent in the 24 weeks to July 21, 2024 reflecting the lower high street footfall. The company continued to expand and optimise its store portfolio in the UK, opening two new stores, extending two existing stores and re‐locating two stores during the period.

In Europe excluding the UK, sales growth is expected to be around 5 percent in the second half, with a strong contribution from space expansion. Most markets in Europe delivered growth including Spain, France and Italy. Like‐for‐like sales growth is expected to be around 0.9 percent, with growth of 1.1 percent in the third quarter and projected growth of around 0.7 percent in the fourth quarter.

The company said Germany and the Netherlands both performed well, while Ireland sales impacted by weather‐impacted performance more in line with the UK. There were eight new store openings during the period: three in Spain, two in Italy, one in Ireland, one in Romania and Primark’s first store in Hungary.

In the US, sales growth is expected to be around 25 percent in the second half. Primark opened three new stores in the period and also launched its first US marketing campaign in the New York area.

As part of the continued market expansion, the company has signed an agreement with the Alshaya Group to explore the opportunity to open stores in the Gulf Cooperation Council (‘GCC’) markets.