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Primark foresees strong yearly sales gains but margins will suffer on weak sterling

All is looking pretty good on the sales front for Primark. The Association British Foods-owned value fashion retailer said sales for the year are expected to be 11% currency neutral, driven by increased retail selling space, and 21% ahead at actual exchange rates.

If you think that’s good, comp sales are expected to jump 12%, and 22% ahead at actual exchange rates. The increase in average retail selling space in the first half, compared with the same period last year, was 12%.

However, Primark expects margins at the retail chain would take a knock from the weak pound.

“As forecast, the operating profit margin in the first half will decline, mainly reflecting the strength of the US dollar on input costs,” it said Monday.

“The full effect of sterling weakness against the US dollar on Primark’s purchases will result in a greater margin decline in the second half because our currency hedges were at more advantageous exchange rates in the first half.”

ABF said it is pressing ahead with domestic and international expansion with stores in the UK, Belgium, Spain and the US slated to open over the next three months.

“We still expect a total of 1.3m sq ft of new selling space in this financial year,” it said.

Some 0.3m sq ft of new space is planned to open in the next quarter, comprising Uxbridge in the UK; Charleroi, Belgium; Granada, Spain; Zwolle in the Netherlands and Staten Island in the US, plus an extension to the Downtown Crossing store in Boston, US.

Meanwhile, Primark said new stores opened in H1 traded strongly and its business in the US “continued to develop.”

The new store opening programme in the first half was “very strong”.