Primark’s parent company Associated British Foods (AB Foods) is expecting to post a £20 million loss for the full year despite sales growth at the retailer.
In a trading update this morning the group, which also owns a grocery and sugar supply business, said that unfavourable exchange rates have taken a bite out of its margins and will results in a major loss for the full year.
Its budget fashion chain Primark will see sales for the full year rise 5.5 per cent on a constant currency basis, which reportedly offset a poorer performance in its sugar arm.
At actual exchange rates this figure rose to six per cent thanks to a 900,000sq ft increase in selling space across 15 stores, including four new stores in the UK.
Although this growth was offset by a two per cent decline in like-for-like sales internationally, Primark performed well in the UK seeing a like-for-like sales boost of 1.5 per cent, while total sales in the country also rose six per cent.
“With two thirds of the group’s operating profit earned outside the UK, the strengthening of sterling against most of our trading currencies, other than the euro, will result in a loss on translation this year of some £20 million,” AB Foods said.
“Strong profit performances this year from Primark, grocery, agriculture and Ingredients are expected to more than offset the adverse effect of lower EU sugar prices.”
This follows news at the end of last month that Primark’s five-storey flagship in Belfast, which it has called home since 1979, was destroyed by a fire.
None of the listed store’s 300 staff were hurt in the fire, and the retailer has confirmed that the costs will be covered by its insurance, while losses incurred by not trading will be underwritten.
The company’s full year results are due on November 6.