1Q18 Trading Update

Primark’s parent company, Associated British Foods (ABF), reported its 1Q18 trading statement for the 16 weeks ended January 6, 2018. This report will focus only on Primark, ABF’s retail segment. Primark’s sales increased by 7% at constant currency and by 9% as reported, in the 16 weeks ended January 6, 2018, driven by growth in selling space. Since the last financial year-end, Primark has opened 0.3 million square feet of selling space and intends to open a further 1.2 million square feet over FY18. The company observed “strong” comparable sales in the UK and remarked that there was “a consequent strong increase in share of the total market.”Unusually warm October weather hindered sales in Europe, although sales improved later in the five weeks to Christmas. Primark continues to see progress in US trading.

Outlook

Management expects Primark’s operating margins for 1H18 to be similar to 1H17’s levels, as efficient buying during this period is believed to offset the effects of a weak British pound and a strong US dollar on purchasing. In 1H17, Primark’s operating profit fell by 2% at constant currency, mainly due to British pound weakness and US dollar strength straining input costs. Consequently, ABF’s operating profit margin eroded by 170 basis points to 10.0%. Management maintained its outlook for the group, with growth in adjusted operating profit and adjusted earnings expected for FY18. ABF reports its half-year trading update on February 28, 2018 and full results on April17, 2018.