Primark drives AB Foods profit rise

Associated British Foods predicted its Primark discount clothing chain would remain Britain's fastest growing major retailer this year, though its profit growth would moderate amid higher cotton prices and a weak economy.

A 55 percent jump in Primark's operating profit in the six months to March 2 drove a 20 percent increase in AB Foods' group total to 496 million pounds ($756 million), beating analysts' average forecast of 485 million pounds.

Many British retailers have been finding the going tough as consumers fret over job security and a squeeze on incomes.

Primark, with its focus on low prices, has been one of the few to buck the gloom. Sales at stores open over a year increased 7 percent in its fiscal first half, while its margins rose 2.4 percentage points to 11.9 percent, helped by lower cotton prices and a weak U.S. dollar.

But AB Foods said Primark's trading had been weaker during the prolonged period of cold weather since the new year and flagged pressure on margins for autumn/winter ranges due to a renewed rise in cotton prices, which would hold back profit growth.

"Seven percent like-for-likes are clearly extraordinary, even if it comes off a bit through the second half we will be the stand out retail performer in the UK market," Chief Executive George Weston told Reuters.

Primark's performance and a 29 percent rise in profit from the group's grocery division, whose brands include Twinings, Ryvita and Ovaltine, more than offset a 5 percent fall in its sugar business, where a better performance from the main Illovo business was outweighed by a decline in China.

Group revenue was up 10 percent to 6.33 billion pounds, underlying earnings per share (EPS) rose 22 percent to 41.9 pence and an interim dividend of 9.35 pence, up 10 percent, is being paid.