Penneys owner Associated British Foods (ABF) expects sales and profits for the half-year to the end of February to exceed those for the same six-month period two years ago, indicating the company has made a near-full recovery from the pandemic.

In a trading update, ABF said sales at Penneys, which trades as Primark internationally, would be 60% of the same time last year on a constant currency basis, with an operating profit margin of 11%, as stores remained open for the whole period, except for short-lived closures in Austria and the Netherlands.

Inflation in the price of raw materials and disruption to the supply chain has been "broadly mitigated" by a reduction in store operating costs and overheads and a favourable US dollar exchange rate, and sales also improve on a like-for-like basis year-on-year.

The group also expects to pay less tax than it did in the year prior to Covid-19 due to the "stronger profitability" of Primark and the consequent change in weight of profit by tax jurisdiction.

"We expect growth in adjusted operating profit for the group in the second half. As a result, our outlook for the full year is unchanged with significant progress expected in adjusted operating profit and adjusted earnings per share for the group," ABF added.

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Thanks to sales of autumn/winter inventory from the prior year, cashflow at the company is expected to improve compared to the first half of 2020-21 when Primark store closures resulted in outflows of £650m (€777.3m).

Net cash before lease liabilities is expected to be some £1.5bn (€1.8bn) for the half-year, up from £705m (€844m) a year prior, while lease liabilities of £3.2bn (€3.8bn) will bring the company's net debt to some £1.7bn (€2bn).

ABF launched its first public bond on 10 February, raising £400m (€478m), to be paid back with 2.5% interest by 2034. Some £297m (€355m) of Private Placement Notes mature this financial year and in the 2024 financial year.

Primark has opened 27 new stores over the past two years, increasing its retail selling space by 8%, and total sales are expected to be 4% lower than pre-pandemic levels.

Operating profit at the retailer has "recovered strongly" to 11%, while like-for-like sales are expected to be down 11% on pre-Covid levels, although customer footfall is picking up, particularly in the UK and Ireland, following the Omicron wave.

"Stores in retail parks and town centres continue to outperform destination city centre stores with like-for-like sales in retail parks ahead of pre-Covid levels," ABF said.

Like-for-like sales will be down 9% in the UK and 14% in continental Europe, with the company estimating a loss of £32m (€38.3m) from the Austrian and Dutch store closures, but ABF is confident of growth opportunities in France, Italy, Spain and Portugal.

The firm expects like-for-like sales growth of 2% in the US, with sales up 35% overall from the same period two years ago.

Primark has added 200,000 sq ft of selling space since the end of its last financial year, with four new stores in Italy, Spain and the UK bringing its total footprint up to 17m sq ft at 402 stores worldwide. ABF expects to add another 500,000 sq ft this year.

Photo: CEO of Primark Paul Marchant pictured today outside Penneys Mary Street, Dublin in November (Pic: Sam Boal / RollingNews.ie)