THE owner of high street clothing retailer Primark has lifted its profit expectations after consumer spending proved to be “more resilient than anticipated” at the start of the year.

Associated British Foods (ABF) declared it expects adjusted operating profit margin for its Primark clothing business to be above eight per cent for the full year, as it benefits from “higher sales and lower operating costs”.

It came as the company said trading at Primark had been “good in all its markets, well ahead of expectations, and represents a material improvement in both the UK and Europe”. Primark sales are expected to have risen by 16% to £4.2 billion in the first half, when currency exchange effects are stripped out.

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In a pre-close period trading update, ABF said Primark trading in the UK has been “strong” and expects sales to grow by 15% in the first half, driven by a 14% rise in like-for-like sales. The company said it had grown its share of the UK clothing, footwear, and accessories market by value, adding that footfall “remains strong” in city centres, high streets and retail parks.

ABF stated: “We believe our proposition of great quality at affordable prices and attractive store experience is proving increasingly appealing to both existing and new customers. Early reaction to our spring and summer ranges has been very positive.”

The company added: “We expect Primark total sales to be 16% ahead of the same period last year driven by like-for-like sales 10% ahead as a result of higher unit volumes and higher average selling prices. Footfall increased strongly in both the UK and in Europe.

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"Last year sales were disrupted by the consumer reaction to Omicron from December, which resulted in a reduction in footfall, and store closures for a period in the Netherlands and Austria. Covid-related public health measures remained in place in a number of European countries into the spring.”

The update from ABF comes amid signs that UK inflation may have peaked and that the anticipated recession may be shorter and shallower than previously feared.

It also underlines the appeal of the price-competitive model offered by Primark during the cost-of-living crisis.

Primark is part of a group at ABF that includes major food operations, with businesses in the grocery, sugar, agriculture, and ingredients sectors.

The company said that its expectations for the full year have improved, noting that adjusted operating profit is now expected to be broadly in line with the previous financial year, at around £1.4bn.

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Aarin Chiekrie at stockbroker Hargreaves Lansdown, said: “ABF expects group sales to jump up as consumer spending holds up better than anticipated. Primark’s had a big hand in underpinning the group’s increased sales performance, expecting to see double-digit growth as its customers find refuge from cost-of-living pressures in the value retail store.

“Despite being well positioned to deal with consumers’ shrinking budgets, ABF is not without its challenges, the main one being significant cost inflation. The group’s trying to offset this through price increases, but this risks alienating the value-chain’s core customer base. This means that cost increases haven’t been fully passed onto customers so far, resulting in Primark’s margins falling from 11.7% to around 8%.”

ABF expects adjusted operating profit for the food business to be “modestly head of last year”, with profit at its ingredients division forecast to be “well ahead”.

The company said: “As expected, increased costs as a consequence of the much lower UK beet crop will reduce second half profit and bring adjusted operating profit for the full year at AB Sugar broadly in line with the prior year. We now expect the grocery adjusted operating profit to be broadly in line with the prior year.”

ABF stated that “we remain cautious about the resilience of consumer discretionary spending in the face of continuing inflation in the cost of living and higher interest rates. Our expectation is that like-for-like sales growth in the second half will be lower than that achieved in the first half but, based on our experience to date, will be better than our previous expectation.”

Shares closed up 2.2% at 1,989.8p.