Brexit puts pressure on Penneys prices

The retailer's sales continue to rise...

Penneys' owners, Associated British Foods has announced strong half-year sales, but it is also warning that its margins are shrinking as sterling continues to struggle.

Primark sales were 11% higher on a constant currency basis - and 21% at actual exchange rates according to a trading note ahead of its interim half-year results.

Its retail space increased by 12% - and it will continue to expand in 2017.

Like-for-like sales in the UK are expected to be 2% higher when its final results are submitted.

"As forecast, the operating profit margin in the first half will decline, mainly reflecting the strength of the US dollar on input costs. Foreign exchange contracts are now in place for the majority of the remaining purchases for this financial year and our expectation for operating profit margin decline for the full year is unchanged," the group noted.

Primark is reacting to a 16% drop in sterling's value against the US dollar - and a 10% decline against the euro since the Brexit vote.

While other retailers plan to nudge up prices by as much as 5% to combat currency pressures, Primark plans to absorb these costs across its business, keeping retail prices at the same level.

Last year a spokesperson for Penneys confirmed to Newstalk that Primark's commitment to not increase prices "absolutely extends to Penneys."

By the 4 March 2017, 329 stores will be trading, occupying 13.1 million sq ft of retail space around the globe.

16 new stores were opened during this six month period - including a major new location at Dublin's Liffey Valley.

In the next quarter, new stores are planned in the US, Belgium, the Netherlands, Spain and the UK.