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Penneys-Primark revenues rise to £4.5bn though cautious shoppers weigh on sales growth in Ireland

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Clothing retailing giant Penneys-Primark said revenues grew very strongly to £4.5bn (€5.2bn) at the half-year stage, although sales growth in Ireland was weighed down by a milder winter and cautious shoppers amid the cost-of-living crisis.

Associated British Foods, or ABF,  which operates food, agriculture, and sugar operations, as well as the Penneys-Primark stores, also said it sees a limited fallout for its group-wide corporate tax rate as a result of the decision by the Irish government to raise the minimum rate of corporation tax for large corporates from 12.5% to 15%. 

The Penneys-Primark operations posted a 45% jump in adjusted operating profit to £508m in the first half of its financial year that ran to early March. Revenues grew “very strongly” by 6% to £4.5bn in the period “driven by newly-opened stores and by last year’s carefully selected price increases to offset inflation” across its stores in Britain, continental Europe, and the US, ABF said. Its market share in Britain of the clothing, footwear and accessories market in Britain rose to 6.9%, it said. 

Trading in France, Spain, Italy, Netherlands, was also “very strong”. However in “the Republic of Ireland and Portugal, we had only satisfactory trading, with warm weather holding back pre-Christmas sales and slower recovery in consumer sentiment”, while comparable sales in Germany grew despite transport strikes in the country, the company said in the earnings statement. 

On tax, ABF said that it paid an effective tax rate of 23.2% across the group in the period. It is also assessing the effects of the changes in the global tax regime under the reforms called Pillar 2 driven by the the Organisation for Cooperation and Development.  

“Of these jurisdictions, the most noteworthy is Ireland, where the statutory tax rate is 12.5%, but where there will be a local top up tax to 15%,” ABF said. “Based on a high-level assessment, the impact in 2023 of Pillar 2 on the ABF adjusted effective tax rate would have been less than 1%. The Pillar 2 legislation is complex and still evolving. We will continue to monitor the impact of future development,” the company said. 

The Penneys-Primark retail operations account for just under half of its overall £9.7bn ABF  generated from its group-wide activities at the half-year stage. On Penneys-Primark, ABF predicted higher sales through the rest of the year. “We expect Primark to continue to perform well in the second half driven by our store expansion programme and the modest levels of like-for-like growth, as we focus on driving volumes,” the company said. “We expect a moderate improvement in adjusted operating margin in Primark in the second half compared to the first half, albeit with a step-up in investment to support medium-term growth,” it said. 

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