Leading discount fashion retailer Primark is set for a rebound to profits growth this year after a fall in cotton prices and as it opens a number of big new stores in Germany and Scotland.

The 223-strong store chain, owned by Associated British Foods , suffered last year from rising cotton prices and hefty summer price discounting on the UK high street and saw profits down 8 percent in its financial year to September 17.

Primark outperformed many retailers with annual like-for-like sales up 3 percent, but its decision to absorb much of the spike in cotton prices saw its profit margins fall in the worst performance for the store chain for a decade.

We will get decent overall and like-for-like sales this year with the margin not down significantly this year and so we will see profits growth at Primark, said AB Foods Chief Executive George Weston in an interview after annual results.

Weston added because the group buys cotton forward it will only see the full benefits of lower costs from January 2012.

The retail environment is very challenging and people have a lot less disposable income and are spending very carefully, but we are trading well in this environment, he said.

Primark, which makes around one third of group earnings, saw its annual operating margins fall to 10.2 percent from 12.5 percent previously.

(Reporting by David Jones)