Primark has reported an 18% increase in sales and like-for-likes up 6% for the year ending September 18.

Adjusted operating profit at Primark was £341m, up from £252m the previous year. Operating margin improved from 10.9% to 12.5%.

The fashion retailer, owned by Associated British Foods, said its stores in continental Europe, particularly in Spain, performed ahead of expectations and “provide encouragement for expansion into these new markets”.

In the UK, which remains the most important market with over 70% of the group’s total retail space, like-for-like sales were “strong, particularly by comparison with other high street retailers”.

In Ireland, the weak economy “had an adverse effect on trading”, it said.

The retailer said improved margins was driven by economies of scale, and by sterling’s relative strength against the US dollar in the first half which benefited the cost of goods sourced in dollars and sold in the second half.

However, it expects some of this margin improvement to be eroded in the coming financial year due to higher cotton prices and freight costs and increases in VAT, already implemented in Spain and planned for the UK from January. It said it remains committed to its “price leadership” on the high street.

It said it has developed its ethical trading agenda during the year and now has an experienced ethical trade team of staff supporting the ethical trade director in the UK, Bangladesh, China, India and Turkey.

13 new stores were opened during the year, three in Spain, our first store in Belgium in Liege, one each in Portugal and Germany and seven in the UK. Several stores have been redesigned and refitted to include upgraded in-store display and merchandising features. This brings the total number of stores to 204.

With the locations where it is already contracted to open space, it expects to add another 0.5 million sq ft of space. This includes the remaining eight of the ten UK stores purchased from Bhs which are currently being refitted. It will also start work on further stores, including a second on London’s Oxford Street, to open in time for Christmas 2011.

Parent ABF reported revenue up 10% to £10.2bn, and adjusted pre-tax profit up 26% to £825m.