By Andrea Figueras
Primark owner Associated British Foods said retail sales took a hit this summer from unfavorable weather, which led to lower demand for seasonal womenswear and footwear products.
The British conglomerate said Thursday that its Primark business--which accounts for the lion's share of the company's earnings--is expected to report a 0.9% drop in like-for-like sales for the final quarter to Sept. 14.
Adverse weather in the U.K. and Ireland hurt store traffic and weighed on the sales of Primark's seasonal lines in womenswear and footwear, but the business lost some market share in the U.K. too, the company said.
Shares in AB Foods fell about 4% to 24.03 pounds in European morning trade, making it the biggest faller in the FTSE 100. This reduced the stock's year-to-date gain to 1.6%.
"While the British weather was not in Primark's favor this summer, robust growth in other markets and new store openings have driven good sales overall," Chief Executive George Weston said.
The group said the division is making good progress in the U.S., where it anticipates sales growth around 25% in the second half of the year ending Sept. 14, helped by recently opened stores.
On a reported basis, AB Foods expects revenue at Primark to rise 4% in the second half. For the year as a whole, Primark's outlook for adjusted operating profit is unchanged, it said.
The unit's margin is expected to be slightly above 11.5% due to a recovery in the second half helped by lower material and freight costs, the company said.
For fiscal 2025, Primark is forecast to achieve sales growth and an adjusted operating margin broadly in line with the current year's level, AB Foods said.
However, the group said its sugar business is hurt by lower prices in Europe due to abundant supply, which is expected to drag the segment's earnings this year and next.
The group estimates the sugar division will make an adjusted operating profit of around 200 million pounds ($262.9 million) for the current year, below prior expectations. For fiscal 2025, this is expected to drop to between 50 million and 75 million pounds.
Sugar profitability is expected to recover in fiscal 2026, AB Foods said.
"Notwithstanding this short-term volatility in sugar, we are optimistic about the outlook for the rest of the group," AB Foods' CEO said.
The company intends to extend a share-buyback program by additional 100 million pounds, which it aims to complete around the time of its annual results on Nov. 5. It completed its second buyback program of 500 million pounds.
Write to Andrea Figueras at andrea.figueras@wsj.com
(END) Dow Jones Newswires
September 05, 2024 04:39 ET (08:39 GMT)
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