James Davey

LONDON (Reuters] -Associated British Foods reported Monday that Primark’s outlook was improving. However, it warned its food businesses about rising inflationary pressures.

According to Primark’s better results, sales and adjusted operating profits for the first half of March 2005 would have been “strongly ahead” over previous years and pre-COVID 19 levels.

Primark was forecast to sell more than 60% last year in constant currency, with an operating margin of 11%.

The improvement was due to all Primark stores being open throughout the entire period, with the exception of short periods in Austria and The Netherlands. This is in contrast to the long periods of store closings in Europe and the UK in the first half last year.

John Bason, chief finance officer at Omicron told Reuters that Omicron reduced December footfall but is now seeing footfall improve across the whole piece. He also highlighted strong demand in luggage and swimwear.

Primark’s inflation effects on raw materials, and its supply chain were generally mitigated by lower overheads and store operating costs as well as a favorable U.S. currency exchange rate. Primark stated in January that it will not increase prices for the spring/summer.

All its food companies had suffered rising inflationary pressures in commodities, raw materials and energy.

There have been steps taken to reduce these high input costs by implementing price increases and operational cost savings. But, they cautioned that inflation will be a constant lag behind price rises.

It expects that there will be some margin cuts in the three businesses during the first half of the year, but anticipates a rebound by the end of the financial year.

At 1009 GMT, shares in the group fell 2.9%.

AB Foods’ grocery brands are Twinings tea and Jordans cereals. Kingsmill bread is also available.

Bason warned that Russia’s invasion in Ukraine may push global wheat prices up.

The profit growth at AB Sugar is expected to continue in the second half of this year.

AB Foods’ outlook for the year was stable with no change in adjusted operating profit or adjusted earnings per share.