Associated British Foods PLC (LSE:ABF), the owner of value retailer Primark, blew up any concerns today that it may have been negatively impacted by inflation, reporting 69% growth in year-to-date retail revenue.
Many major retailers have complained this quarter that their customers' spending power has been reduced due to rising inflation, but value retailer Primark appears to have bucked the trend.
Retail sales at AB Foods were up 81% in the third quarter, at £1.7bn, totalling £5.27bn for the year so far, which drove its group sales up by a third to £4bn in the 12-week period to 28 May. The retail sector was its fastest-growing business in the recent quarter and rest of the year so far.
“Much of the heavy lifting has now been passed back to Primark from the combined food businesses, as the effects of the pandemic begin to drop out of the overall picture,” said Richard Hunter, head of markets at interactive investor.
Part of the lift reflects the fact that Primark reopened to customers this year following store closures that lasted through to April last year.
The group said that Primark was on track to deliver an operating profit margin of 10% for the year.
The brand's share of the UK clothing, footwear and accessory market for the quarter was broadly in line with where it was before Covid, as purchasing of holiday essentials grew over the period. It plans to trial a Click & Collect service towards the end of the year in 25 stores in the UK's north-west.
Quarterly sales beat pre-Covid sales three years ago by 4%, the group said, driven by UK trading, which it reported was “much improved” this quarter. Online traffic at Primark rose 60%, with greater use of its online stock checking facilities.
However, on a like-for-like basis, the group's retail sales for the quarter were 9% below pre-Covid levels, as sales in continental Europe only started to improve after the final removal of Covid restrictions and were down 15% on a like-for-like basis.
The group said it has increased its retail selling space since the start of the year by 0.3mln square feet and plans to open 530 new stores by 2026. It recently opened a flagship store in Milan and relocated a store in Ireland, expecting to add further stores in Italy, Ireland and New York by the end of the year.
“We expect to add a net total of 0.5mln sq ft of retail selling space this financial year,” AB Foods said in the trading statement.
Total sales in the US market, where it has made several new store openings, were 35% ahead of pre-Covid levels. The Lilo & Stitch label was “one of the top performing ranges”, and its partnership with Disney and Stranger Things collection met an “exceptionally strong response”, the company said.
“The return of tourism and more office working combined with an improvement in the weather across all our markets was reflected in a strong customer reaction to our fashion ranges,” it said.
Sales in its food businesses meanwhile rose 10%, which the company said reflected price actions to recover input cost inflation and volume increases.
Its shares were up 0.65% in early trades this morning.