Budget fashion chain Primark and its parent company is “nearly through” a period of price rises which have knocked profits at Associated British Foods,its CEO told The Standard today, breathing new life into hopes that inflation is easing on the high street.
George Weston said: “I would be optimistic that we don’t have to move our own prices up … I wouldn’t say we are 100% done, but we are nearly through it. And we’ve not seeing further cost pressure on ourselves, so I think we’re in a much happier place.”
Speaking as the company reported a rise in revenue but a drop in profits for the six months to March 4 as the cost-of-living crisis took a toll, Weston pointed to signs that Primark in particular was ready to return to more familiar territory.
“We can get back to trading as we always had – we move prices down not up,” he said.
Associated British Foods’ revenue for the period rose by over a fifth to £9.6 billion, with adjusted operating profit down 3% to £684 million. ABF is also a major sugar producer, including the Silver Spoon brand and it also makes Twinings tea and Kingsmill bread among a range of grocery products.
At Primark, sales were up by almost a fifth to £4.3 billion, while adjusted operating profit of £351 million fell 15%, as the chain absorbed higher costs to protect market share.
“We moved prices up by less than our costs went up,” said Weston. “That was the right thing to do for our shoppers and the long-term health of the business.” Its Kids range of children’s clothes was, in particular, sheltered from any price rises.
Primark also announced plans today to extend its click and collect trial to its 32 stores in and around London this summer, including its twin flagship shops on Oxford Street. Its website features a stock checker, allowing customers to see what is available before making purchases.
Weston also told The Standard that Primark’s flagships were trading “fantastically well”, having been “hit hardest” by the Covid pandemic.
“Footfall took a while to come back, but with the return of tourism in particular, and the return of most of us wanting to come back to the city centre, it’s more than recovered.”
For the group, ABF stood by its guidance for the full year.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: “The cost-of-living crisis remains a dark cloud over consumers’ heads. In the short-term, jittery customers and inflationary pressures are likely to keep a lid on profits.
“But longer term, as inflation eases and commodity costs normalise, we think there’s plenty of room for Primark to restore margins.”
ABF’s shares fell 140p to 1930p on Tuesday. .
