ABF shares rise on Primark US expansion

Shares in Associated British Foods rose 8.7% to 2,959p on long-awaited news that it plans to open its first Primark stores in the United States.

Investors have seen the success the retailer has made of its Primark brand across several European nations and think that it has the acumen to storm this even bigger market.

The company has signed a lease on a huge 70,000 sq ft store in the historic Burnham Building in the heart of Boston, home of Harvard University and Massachusetts Institute of Technology, but it will not be ready until the end of 2015.

However, ABF said negotiations are already under way to open further stores in the north east USA.

The budget clothing chain owner announced half-year trading results that reflected a good performance from Primark, which also continues to open stores in the UK, but which were hampered by challenges in the sugar market. Operating profits at the retail operations, which include Primark, rose 26% to £298 million.

But overall adjusted pre-tax profit climbed by 4% to £468 million for the 24 weeks ended 1 March while revenue for the period slipped 2% to £6.2billion. Revenues from continuing operations at constant currency were up by 1%.

Operating profit rose 2% to £463 million and basic earnings per share improved by 12% to 43.2p, while adjusted earnings per share rose 10% to 45.8p.

The difficult European sugar business will result in a "substantial" reduction in profits from the Silver Spoon division this year, the company said, and also warned that if the current strength of sterling continues it will have a greater impact on translation of overseas results in the second half.

The business will not have been hampered by newspapers headlines this week that have also made much of singer Rita Ora's shopping trips to Primark in disguise.

The accounts also show that Primark has now given a total of £7 million in compensation to the victims of the Rana Plaza factory collapse in Bangladesh last year. More than 1,130 people died when the garment factory near Bangladesh’s capital, Dhaka, collapsed in April 2013, but the operation produced more than 23 different brands.

A dividend of 9.70p has been recommended, up 4% from last time.