Irish sales at the parent of retail giant Penneys surged 48 per cent last year compared with the previous 12 months, its annual report shows.
The report, which covers the year ended September 17th, 2022, described the Irish trading performance of AB Foods (ABF) as “strong”.
“On a three-year like-for-like basis, we traded strongly and consistently throughout the year,” it said.
The annual report also included a note on the OECD’s plan for corporate tax reform, and said it did not anticipate it would have a material impact on its effective tax rate here.
“The most significant change would be the likely increase in the corporation tax rate for the Republic of Ireland,” it said.
“The Irish tax authorities have proposed an increase in the corporation tax rate from 12.5 per cent to 15 per cent in the future. Based on current proposals we therefore do not anticipate a material impact on the group’s effective tax rate.”
Separately, ABF said Primark will not increase prices any more than already planned before next autumn despite soaring costs for the business.
ABF said that, as customers tighten their belts, it wants to make sure they still see the brand as a cheap alternative to other high street retailers.
As a result the business will not impose any price rises on its ranges until next summer, apart from those it has already implemented and planned.
Chief executive George Weston said: “Primark has faced significant input cost inflation and sharply moving currency exchange rates.
“We have decided to hold prices for the new financial year at the levels already implemented and planned, and to stand by our customers, rather than set pricing against these highly volatile input costs and exchange rates.”
The business said the decision is “in the best interests of Primark”, which will support its “everyday affordability and price leadership” and help it grow market share.
Mr Weston added: “Sales, margin and profits at Primark increased significantly as more normal customer behaviour resumed after the pandemic.
“Significant progress was made in building out Primark’s digital capability, which will be a key element in the future development of Primark.”
The business is currently trialling click-and-collect in 25 shops.
Primark’s like-for-like sales have broadly returned to pre-Covid levels in the UK, but remain weaker in continental Europe.
Despite rising costs, it was a good year for ABF – which also includes British Sugar, which makes sugar from sugar beets and grows medical cannabis.
The business said revenue jumped by more than a fifth to £17 billion (€19.5 billion) in the year to September 17th, as pretax profit increased by nearly half to £1.1 billion.
The food business is expected to grow sales significantly this year as it hikes prices for customers, and ABF will also bring in some extra cash from the already-planned price rises at Primark.
But adjusted operating profit is expected to fall as the business faces cost increases.
“Although ABF’s full-year results are strong, with both the food and Primark businesses performing well, it is clear that inflation is impacting the business,” said Richard Flood, investment manager at wealth manager RBC Brewin Dolphin. “This is particularly true of the Primark clothing retail business, which will likely be challenged with lower margins and profits as a result of higher costs despite continuing strong sales. For investors, the announcement of a £500 million share buyback will be welcomed and will help support the share price.”
It announced an 8 per cent increase in dividends to 43.7p per share, and promised to buy back £500 million in shares from investors.
Richard Lim, boss of the Retail Economics consultancy, said: “These are impressive results against the harsh economic backdrop.
“The retailer is well positioned to benefit from consumers who are trading down and putting lower costs at the heart of their buying decisions.
“Many shoppers are prepared to sacrifice perceived quality and the convenience of online delivery for lower costs and it’s driving people back into stores across parts of the sector.
“However, there’s a perfect storm of cost pressures facing the retailer from spiralling input and operating costs and the impact of a weaker pound and rising interest rates.”
– Additional reporting: PA
