Fashion giant Primark sees first-ever sales fall as owner reveals £200m black hole in its pension scheme
Double whammy sees shares in its parent company Associated British Foods drop by 10.8 per cent
PRIMARK is in line for its first sales fall as its owner reveals a £200million black hole in its pension.
The double blow saw shares in ASSOCIATED BRITISH FOODS closing 10.8 per cent down last night at 2815.61p.
ABF said yesterday like-for-like sales at its “jewel in the crown” fashion chain are expected to be down two per cent year-on-year in the 12 months to September 17.
This will be the first yearly fall since 2000, when records began.
ABF also revealed that its pension fund, in surplus a year ago, had suffered under low interest rates like other schemes.
The firm, which also owns Twinings tea and Kingsmill bread, warned the weak Pound would lower Primark profit margins but benefit its sugar business.
It blamed the fashion fall on “unseasonable weather” — warm pre-Christmas temperatures and a “very cold” March and April.
Sales at Primark will still be up nine per cent on the year before. But this is after it opened 22 stores, bringing its total to 315.
The FTSE 100 group was also vague on the chain’s performance in the US.
It said only “awareness of the Primark brand started at a low level and has continued to grow”. It noted “very positive customer feedback” but no details of overall sales.
Neil Wilson, markets analyst at ETX CAPITAL, said: “The pension deficit is a concern. The scheme has swung from being in surplus last year to a deficit of £200million.
“That chimes with what we’re seeing elsewhere as record low bond yields are wreaking havoc with company pensions.”
related stories
It is estimated the country’s pension deficit collectively now stands at more than £400billion.
In April, the BHS chain collapsed into administration in part because of its £571million pension deficit.
Russ Mould, at stockbroker AJ BELL, said the weak Pound is “having a bitter-sweet effect” on ABF.
He added: “While a weaker Pound will have a positive impact on margins for the group’s British Sugar business next year it will have the opposite effect on Primark, the jewel in the group’s crown.”