Primark’s profits for the first half fell due to currency headwinds, while the mild autumn weather took a toll on like-for-like sales at the retailer.
Adjusted operating profit fell 1% year-on-year in constant currency during the first half and 3% at actual currency rates, as the dollar strengthened against the euro.
Primark’s sales for the 24 weeks to February 27 were up 7% in constant currency on 2015 driven by increased retail selling space. However, the value chain said trade was weaker in the weeks leading up to Christmas as a result of unseasonably warm weather across Northern Europe, and like-for-like sales were less than 1% below last year- the retailer’s first drop in half-year underlying sales in 12 years.
The retailer said the impact of the devaluation of the euro against the US dollar was felt in the first half when operating profit margin of 11.7% was 0.9 percentage points lower than last year.
Howeve,r it added that margin erosion was mitigated by a “good buying performance and a lower level of mark-downs arising from a well managed stock position.”
Retail selling space increased by 800,000 sq ft year-on-year, bringing the retailer’s total number of stores to 299.
Primark opened six new stores in the period with more opening in the second half.
In the US, where early trading had been “encouraging”, six stores are scheduled to open later this year and a 70,000 sq ft store in the American Dream shopping mall in New Jersey will open in 2017. This will bring the total number of stores in the US to nine.
George Weston, chief executive of Associated British Foods, said the referendum on Europe on June 23 had created “uncertainty in the business community and financial markets”.
He added that ABF is an “international business with diverse interests across 48 countries and a business model that, wherever possible, aligns production with the end markets for its products.”
Weston said Primark operates “discrete supply chains for its stores in each of the UK, US and eurozone and undertakes relatively little cross-border trading between the UK and the rest of the EU.”