SHARES in Primark's owner rose by more than six per cent after it reported solid trading results over the crucial festive period that exceeded expectations and pushed revenue up as the retailer pushes ahead with US expansion.
Primark's sales rose by 4%, partly driven by increases in retail selling space which has risen by more than a million square feet owner Associated British Foods said in a trading update to the London Stock Exchange.
The outlook for the year was said to remain unchanged, and operating profit is expected to be in line with last year at around £1.4bn, as Primark, as the "jewel in the crown" continues to shine, all the while without an online presence.
Read more: Sir Tom Hunter hails progress made with West Lothian new town plan amid Brexit uncertainty
However, its sugar business reported a significant drop of 12% in revenue.
Shares in the FTSE 100-listed group jumped 6.5%.
The retailer, which has 20 Primark stores in Scotland employing more than 3,000, saw a "modest decline" in like-for-like sales in the 16 weeks to January 5 but said profits were "well ahead".
The parent firm, which runs sugar and grocery businesses including Twinings and Ovaltine, saw group-wide revenues overall rise 2% on a constant currency basis in the 16 weeks.
ABF said in its trading update: "Other than the expected reduction in Sugar revenue, sales growth was delivered by all our businesses.
"The UK performed well and our share of the total clothing market increased significantly.
"Sales were 1% ahead of last year for the period, in a market which declined year-on-year."
Read more: Ian McConnell: Consensus? MPs have duty not to fall in line with a damaging Brexit
Like-for-like sales in September and October were ahead but reduced footfall affected sales in November.
ABF also said: "Sales in the Eurozone were 5% ahead of last year at constant currency.
"Sales growth was especially strong again in France, Belgium and Italy, performance strengthened in our second largest market, Spain, but soft trading continued in a difficult German market.
"We are pleased with the strong US performance in the period."
New openings including a Brooklyn store made a big contribution to the rise, said Russ Mould, investment director at AJ Bell.
He said that a "significant chunk" of the firm's growth is achieved through new openings.
"Like-for-like sales declined modestly although there were some bright spots with Christmas sales exceeding expectations after a very tough November and strong trading reported in the US."
He added that "if shoppers react to the current uncertain economic backdrop by cutting back their spending, Primark is likely to suffer".
"Lacking a material online operation, it is also reliant on high street footfall which is in clear decline."
Graham Spooner, investment research analyst at the Share Centre, said the markets' focus remains on Primark, "especially as these numbers tell the story of the important Christmas period".
Read more: Dumfries & Galloway caravan Park sold after bidding war
He said: "The group has been attempting to conquer the US market and though at an early stage in the expansion, there was a pleasing performance especially from its Brooklyn store which opened in July. "There was also an improvement in operating margin."
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: "ABF’s crown jewel is still Primark, and it’s managing to shine through a pretty muddy high street environment.
"With brands from Debenhams to Superdry battling with a dwindling customer base, Primark’s doing well to stand firm, especially because it doesn’t have an online presence to rely on like the others."
Chris Beauchamp, chief market analyst at IG, focussing on online trading, said: "The budget clothing retailer has managed to do well compared to its peers in the tough UK market – given the prevailing situation, any rise in sales is to be cheered."
Tom Stevenson, investment director from Fidelity Personal Investing's share dealing service, said ABF delivered a "sweet and sour" update.
He said: "Sugar is suffering from low European prices but that was well-flagged. Retail remains the star turn."
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here