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Primark sales up 13% but rising costs affect profits

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Value fashion retailer Primark experienced a 13 per cent increase in revenues for its latest financial year, but today’s trading statement from parent company Associated British Foods (ABF) revealed profits were down eight per cent during that period.

Sales, which totalled £3.04 billion for the 52 weeks to September 17th 2011, were aided by the opening of 19 stores over the course of the 12 months, including 11 in the UK, while profits were reportedly held back due to the rising cost in materials used to make its products.

Adjusted operating profit margin at Primark was down from 12.5 to 10.2 per cent.

ABF, which also operates separate divisions for its sugar, grocery, ingredients and agricultural businesses, said today that it expects to pursue further investment opportunities in the year ahead, particularly through its retail arm, following a rise in group sales and a one per cent profit-before-tax increase to £835 million.

With 154 stores, the UK is Primark’s largest market, but in the last 12 months the fashion specialist has significantly increased its presence in the Iberian and northern European regions, where it now operates 24 and seven stores respectively. It also has 38 stores in the Republic of Ireland.

Improvements to design and layout have also been made in a number of stores, with the company seeking to provide “a more contemporary shopping experience” for its customers. The new Westfield Stratford City store in east London, which opened on September 13th, is an example of this development.

Since the year-end, Primark has re-opened its store in Gateshead’s Metrocentre, showcasing its new modern look.

Commenting on the retailer’s performance over the last 12 months, ABF CEO George Weston said: “We achieved like-for-like sales growth of three per cent driven by a strong performance in continental Europe and some growth in the UK and Ireland.

“This was achieved against a background of weaker consumer demand reflecting a reduction in disposable incomes, particularly in the UK.

“Profit on the adjusted basis was eight per cent lower than last year reflecting the decision to absorb some of the margin pressure caused by high cotton prices and the increase in VAT in the UK.

“By not increasing prices to recover all of its cost inflation, Primark chose to forfeit increased profitability for the support of its loyal customer base and maintained its position as offering the best value on the high street.”

Published on Tuesday 08 November by Editorial Assistant

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