It looks like Primark's Christmas was a stinker

Cheap and cheerful clothing giant Primark says “warmer and wetter weather across Europe” led to “weaker” sales over Christmas.

Associated British Foods (ABF), the owner of Primark, put out a trading update on Thursday with some mixed signals in it. Revenue for the 16 weeks to 2 January is up 3%, but down 2% at current exchange rates, for example. So the underlying business is doing well but getting whacked by currency fluctuations.

Then there’s Primark — sales in the period are up 7%, or 3% at today’s exchange rates. But the picture is a little more complex than that.

Primark has opened loads of new shops in the year since last Christmas, including breaking into America and six alone in the period covered. These growth figures include sales from new stores, which is something analysts and investors don’t usually like to see. They want to see sales growing in stores, not growth just coming from new openings — spending money to make money.

If you strip out sales from new shops — so-called “like-for-like” sales — ABF says the retailer had seven good weeks thanks to the warm autumn, followed by nine bad weeks due to the warm and wet winter. Basically, people want to buy more summer clothes in a hot autumn, but nobody buys your winter stock if it’s still sunny by December.

Not only does that imply disappointing Christmas sales — ABF didn’t break out the specifics — but it also paints a picture of a downward trend, with sales losing momentum.

Still, Primark is ploughing ahead, with plans for six new US stores this year, its first shop in Italy, and a new 1.1 million square foot warehouse in the UK.

ABF’s other big business, sugar, is showing signs of improvement, with 2016 set “to be the first year of global sugar deficit for five years which has resulted in some improvement in world prices.” A performance improvement plan is also on track.

But ABF concludes the update by saying it expects profits for the year to take a £25 million hit due to unfavourable exchange rates and it “continue[s] to expect currency pressures to lead to a modest decline in adjusted operating profit and adjusted earnings for the group for the full year.”

ABF shares are down just over 1% at 10:05 a.m. GMT (5:05 a.m. ET).

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