(Sharecast News) - Third-quarter sales at discount fashion chain Primark grew 13%, driven by strong summer sales and higher prices as customers seek value for money amid the cost of living crisis, leading parent company Associated British Foods to lift annual guidance.
Like-for-like sales grew 7% supported in the 12 weeks to May 27, with revenue reaching almost £2bn in the quarter and £6.2bn in the year to date.
"As well as seasonal clothing and accessories, sales in health and beauty products were particularly strong," AB Foods said on Monday.
It added that it now expected group adjusted operating profit for the full year to be moderately ahead of last year, with earnings per share also benefiting from a lower group effective tax rate now expected to be below that seen in the first half of the year.
AB Foods, which also owns the the Kingsmill bread brand among others in its large food business, said trading in the division continued to be good, with strong constant currency sales growth in its grocery unit, due to price rises.
The company in April forecast a slowdown in second half sales on caution about the resilience of consumer spending as inflation ate into consumer spending power.
"At a time when people are really watching their pennies, its low-cost clothing is attractive. Particularly for those jetting off on holiday and facing a big cost to do so, who therefore want to refresh their summer outfits on a budget," said AJ Bell investment manager Russ Mould.
"The recovery of physical retail has also provided a big boost to a brand which only has a very limited web-based presence. It should not come as any surprise that when it comes to clothes, shopping in-store is a winner."
"The company is also pushing through some price increases and it's encouraging Primark has the headroom to do so without damaging its value credentials. Particularly when, on a relative basis, it still looks cheaper than high street rivals."
"Often neglected in the analysis of the wider group is the food business, which offers some diversification. This part of the business continues to perform well and the company continues to invest for future growth."
Reporting by Frank Prenesti for Sharecast.com
AB Foods (ABF)