Currency deals to hit Penneys' bottom line
Shares in Primark owner Associated British Foods (ABF) slumped over 5pc yesterday after it warned that a weak euro will result in a bigger hit than expected to its bottom line.
The company will feel the impact during its next financial year as existing currency contracts expire, it said.
However, Primark, which is headquartered in Dublin and trades as Penneys in Ireland, again proved to be a star performer.
ABF noted that exchange rates between some of its major trading currencies have "changed markedly" in recent months.
"The impact on adjusted operating profit in the first half from the translation of overseas results into sterling was a loss of £11m (€15.2m) and, if current rates persist, the translation impact on full year profits when compared with last year would be in the order of £25m (€34.7m)," it predicted.
The company also insisted that the big currency swings wouldn't impact its Primark operations and value for customers.
Chief executive George Weston said Primark's performance in the first half of the financial year had been driven by a significant expansion in selling space and "superior trading".
The currency difficulties came as ABF released first-half results that were in line with market expectations.
Group revenue rose 1pc to £6.25bn (€8.7bn) and was 3pc higher on a constant currency basis.
Adjusted operating profit was down 5pc at £474m (€659m), while pre-tax profit was 51pc lower at £213m (€296m).