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Primark operating margins to be hit by high street discounting

Primark’s operating margin is expected to be hit slightly in its full year results after a higher level of discounting than is normal on the UK high street towards the end of the summer.

Parent Associated British Foods (ABF) said sales at Primark are expected to be up 13% compared to last year when adjusted for 52 weeks’ trading, driven by an increase in retail selling space and like-for-like growth.

In the first half, like-for-likes were up 3% and it expects to achieve 3% for the full year with some growth in the UK and Ireland, despite weaker consumer demand in the second half, and continental Europe strongly ahead.

The group said at its interim results it said it expected operating margins to be lower in the second half reflecting higher input prices and the full absorption of the UK VAT increase. It said there has been higher discounting than usual in summer so operating margin is expected to be a little lower than forecast.

Primark said the recent softening of cotton prices is expected to be reflected in lower input costs in the calendar year 2012.

In this financial year, Primark has opened 19 stores. Before the end of its financial year it will open a 46,000 sq ft store in Westfield Stratford City.

Primark’s full year results will be announced on November 8.

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