Value fashion giant Primark expects accelerated profit growth as cotton prices fall and new space is added.
The retailer, owned by Associated British Foods, reported that first-half like-for-likes rose 2%. Sales climbed 15% to £1.63bn in the 24 weeks to March 3, resulting in operating profit up from £151m to £154m.
Primark won sales as cotton prices rose by refusing to pass on increases to the customer and taking a margin hit, and expects to reap rewards as prices come down.
ABF said: “Primark has now sold through the inventory that was bought when cotton prices were at their high point last year.
“Looking forward, the benefit of lower cotton prices with the momentum of selling space growth and strong trading from new stores can be expected to accelerate the rate of profit growth.”
Although ABF flagged uncertainty about prospects for the eurozone, it reported that Primark’s trading on the continent had exceeded expectations.
Primark opened 10 shops, and added 0.6m of selling space, in the first half. Most were in in Europe, including three in Spain and two in the UK.
By the end of this financial year the retailer expects to be trading from 8.2 million sq ft compared to 7.9 million sq ft at the end of the first half.