With just months before it enters the US market, fast-fashion retailer Primark is reeling from the impact of a sliding euro.
On Tuesday the retailer’s parent company, Associated British Foods PLC, said that it expects a modest decline in adjusted profit for the year. This is worse than what it had previously expected, of only a “marginal decline”.
AB Foods stock dropped by more than 4% after the announcement.
Most of Primark’s revenue is in euros, while it’s sourcing costs are in dollars. With contracts about to expire, costs are expected to rise, which will have an impact on margins.
Primark said that it would absorb the increased costs though.
“We will maintain our position of offering the lowest prices and best value on the high street,” the company said.
This fall Primark will be opening eight stores across the US – the first location will be Downtown Crossing in Boston.
According to the WSJ, ABF Chief Executive Officer George Weston said the retailer has signed a lease at a distribution warehouse in Bethlehem, Pa. to supply the stores.
Primark reported sales growth of 12% for the 24 weeks ended Feb. 28, to £2.55 billion ($3.80 billion).
ABF posted revenue of £6,248m for the period, profit before tax down 51% to £213m and basic earnings per share 58% to 18.1p.
George Weston said:
“This is a sound trading result with significant progress made in operating profit by Primark, Agriculture and Ingredients, and further improvement in Grocery’s margin. As expected, profitability at AB Sugar was substantially lower as a result of much weaker EU sugar prices.
“Primark’s performance was driven by significant expansion of selling space and superior trading by the stores opened in the last 12 months and plans for its entry into the north-east of the US are well advanced.”