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Primark Q4 operating profits to beat expectations despite sales fall

While H2 sales of £3.4bn were ‘lower than expected’, the retailer benefited from a ‘significant reduction in store labour costs and lower store operating costs’

Associated British Foods (AB Foods) has announced that Primark will beat its Q4 FY21 adjusted operating profit expectations, as the group’s H2 retail sales are set to hit £3.4bn.

In a trading update, the group claimed that while Primark’s sales for the year ended 18 September were “lower than expected”, the retailer benefited from a “significant reduction in store labour costs and lower store operating costs”.

While AB Foods’ retail arm had reached almost level with pre-pandemic figures in Q3 FY21, this fell to 17% behind the same period two years ago in the fourth quarter of this year.

The company attributed this drop off to the impact of the “pingdemic” on high street footfall, with like-for-like sales recovering to 8% behind 2019 levels in the final four weeks of the quarter.

Looking ahead, AB Foods said that its operating profit margin will “continue to benefit” from the mix of “lower store labour and operating costs”.

It added: “Our forecast is for the effect on margin of supply chain and raw material inflation to be broadly mitigated by the transaction currency gain arising from the weaker US dollar”.

Primark’s owner also revealed that its expected net cash before lease liabilities now sits at £1.9bn, up from £1.6bn at the end of FY20.

The group’s full-year results for the 53-week period ended 18 September 2021 are scheduled to be announced on 9 November.

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