Associated British Foods PLC (LSE:ABF) posted a bounce back in sales in its latest quarter as retail clothing arm Primark surged ahead especially in the US.
The group also said around 400 jobs are being cut across its UK stores as part of a restructuring of its retail management to simplify the structure.
According to Sky News, the FTSE100 group is creating a new entry-level management role as well as culling some more senior posts.
Primark has 191 stores in the UK employing 29,000 people.
Group sales rose by 19% to £5.57bn in the 16 weeks to 2 January 2022, with food sales up by 6% as sugar and ingredients recovered but it was Primark that again led the improvement with a 36% jump to £2.67bn.
Primark’s margins were also better than expected, said the FTSE 100 group, and though the omicron restrictions in the UK and Ireland affected December, footfall in both countries is now recovering.
The US though was was the "standout performer" at Primark and delivered 4% like-for-like sales growth in the period compared to pre-COVID levels and 37% ahead of two years ago, said the statement.
Rising production costs have affected all of its businesses, AB Foods added, with pressures in raw materials, commodities, supply chain and energy but the supply chain disruption that earlier affected Primark has alleviated.
Grocery, Sugar, Ingredients and Agriculture divisions, in particular, have seen an escalation in prices, but ABF said it is offsetting this by cutting costs and where possible passing these increases through.
“We expect reduced adjusted operating profit margins in Grocery and Ingredients at the half year, due to phasing in fully recovering cost but a recovery in the run rate of these margins by the financial year-end.”
Primark’s profitability is stronger than expected, ABF added, with currency movement offsetting higher prices while sales from now to April will be significantly better than in the comparable period in the last financial year when the store estate was largely closed.
“Overall outlook for the group is unchanged, with significant progress, at both the half and full year, in adjusted operating profit and adjusted earnings per share for the group.”
Shares fell 1.6% to 2,097p.
-- adds job cuts detail, share price --