Primark Gives ABF a Boost

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How a food company got its hand on a fashion retail brand is not what’s important for now. What matters today is the fact that Associated British Foods plc (LSE:ABF), a global conglomerate of food products, is getting a trading boost, thanks to its clothing business Primark.

Shares of the FTSE 100 firm jumped 110 pence, or 7.2%, as at 9:45 AM GMT, in revenue for Primark, contributing to the 9% overall increase in revenue compared to the same period last year.

In a statement, ABF said the strong revenue growth was attributed to the increase in retail space and “good” like-for-like sales growth. To date, Primark has a total of 257 stores, 161 of which are spread across the UK, for a total retail space of nine million square feet.

Primark contributed 28% of ABF’s total revenue in 2012, or £3.5 billion out of the £12.3 billion and over a third of the conglomerate’s profit at £356 million out of £976 million.

Offering “quality, up-to-the-minute fashion at value-for-money” as it described itself, Primark performed well compared to some of its peers in the business at a time when macro-economic conditions in Europe, where the brands are concentrated, are still subdued.

Unlike last year, Primark said that currency translation have no material effect on sales for the year to date ending 22 June 2013. Primark adjusted its revenue in by 2 percentage points from 17% to 15% due to actual exchange rate effects in 2012.

A member of the Ethical Trading Initiative, Primark was put on a bad light last April when a building in Bangladesh where one of its suppliers was located collapsed, resulting in hundreds of death.

As a response, the company provided short-term financial aid equivalent to three months’ worth of wages to over 3,300 employees working in the collapsed Rana Plaza building, regardless of whether they were suppliers of the company or other brands.

Karma may be at work as the brand reduced its debt by a quarter of a billion pounds and the group “remains on track to make good progress in adjusted earnings per share for the full year in line with expectation”, as ABF stated.

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