Primark Profitability to Grow as Retailer Reduces Markdowns

(Bloomberg) -- Budget fashion retailer Primark, owned by Associated British Foods Plc, expects its profitability to grow this year as it reduces markdowns and reins in inventories.

• The company, which also produces sugar and groceries, kept its full-year expectation for operating profit unchanged but said the margin will be a little bit ahead of last year after a strong first half.

Key Insights

• Primark has grown steadily outside of the U.K. with expansion into the U.S., where the company cited strong demand at a recently opened outlet in Brooklyn. Growth was driven by new stores in the first half, with comparable sales down 1.5 percent.
• The company said it’s reducing clearance sales and keeping inventories under control as consumers snap up new lines. Rivals like Hennes & Mauritz AB have suffered from persistently high stock levels.
• As expected, the group’s sugar profits were hit hard by lower prices. The company said the situation should improve for the full year.

Market Reaction

• The shares were down 0.5 percent early Wednesday in London. They’ve fallen 3.5 percent over the past year.

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• Read the statement here.

To contact the reporters on this story: Ellen Milligan in London at emilligan11@bloomberg.net;Deirdre Hipwell in London at dhipwell@bloomberg.net

To contact the editor responsible for this story: Eric Pfanner at epfanner1@bloomberg.net

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