Primark
ABF said Primark sales in the year to date were 9% higher than last year amid increased retail selling space iStock

Shares in Associated British Foods (ABF) tumbled over 3% early on Monday (12 September), after the owner of Primark revealed its pension scheme has plunged to a £200m deficit.

In a trading statement, the FTSE 100-listed group said the slump of its pension scheme, which recorded a small surplus last year, was largely due to record low gilt yields. Gilt yields have plunged in the wake of Britain's referendum on the European Union, amid forecast for subdued economic growth and economic stimulus from the Bank of England.

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In the three months since the referendum, the total UK pension deficit has soared to a record high of £400bn.

The company added that the depreciation of the pound following the pro-Brexit vote would have both a positive and negative effect on its operating profit next year.

"There would be an adverse transactional effect on the profit margin on Primark's UK sales, a favourable transactional effect on British Sugar's margins and a translation benefit on group profits earned outside the UK," ABF said in a statement.

The weaker pound has already had a positive effect on revenues, the company said, adding that the underlying operating performance has been ahead of expectations in the second half and it now forecast full-year earnings to be marginally higher than last year's.

Of its Primark business, ABF said total sales rose 9% year-on-year in the 53 weeks to 17 September, largely thanks to new store openings. However, like-for-like sales declined 2% from the corresponding period in 2015 as they were affected by unusually warm weather in the pre-Christmas period and a very cold period over March and April.

The company added that in the US, where Primark launched in October 2015, awareness of the brand was continuing to grow steadily.

"The brand has been well received with very positive customer feedback, particularly for its exceptional value for money and the breadth of its product range," it said. "We are encouraged by the most recent openings in the regional malls at Danbury, Willow Grove and Freehold Raceway."