By Scott Kanowsky
Investing.com -- Primark-parent Associated British Foods PLC (LON:ABF) says it now expects sales to grow by more than a fifth in the first half as surprisingly strong demand from bargain-hunting customers has helped offset elevated expenses.
In a pre-close trading update on Monday, AB Foods said it now sees total six-month group sales rising by over 20% at actual exchange rates compared to the same time frame in the previous period. At constant currency, the top-line figure is seen increasing by more than 16%.
Underpinning the uptick was trading at clothing retailer Primark, where total sales are expected to jump by over a sixth at constant currency to £4.2 billion (£1=$1.196) thanks to higher unit volumes and above-average selling prices.
"Consumer spending has proven to be more resilient in this trading period than anticipated at the start of the financial year," AB Foods said, adding that early reaction to its spring and summer ranges has been "very positive."
However, adjusted operating profit margin at Primark is now seen slipping to 8% from 11.7% in the prior half-year period. The reduction is partly the result of an increase in labor and energy costs, as well as a strengthening of the U.S. dollar against the euro and British pound, AB Foods noted.
Looking ahead to the second half, the London-based firm warned that it remains "cautious" about consumer discretionary spending habits because of lingering inflationary pressures and a spike in interest rates.
Like-for-like sales at Primark in the last six months of the year are subsequently seen coming in below first-half levels, but better than AB Foods' previous estimates. Full-year income margin is also projected to be above 8%.
Meanwhile, group-wide annual adjusted operating profit is anticipated to be broadly in line with the prior financial year.
AB Foods will announce its latest interim results on April 25.
Shares were in the green in early European trading on Monday.