The owners of Primark upped profit forecasts today, helped by strong sales at the budget fashion house, in a move that will ease fears about the economy, but may unnerve the Bank of England as policymakers fight inflation.
The chain, which has twin landmark shops on London’s Oxford Street, is a barometer of high street spending in almost 200 UK outlets. With the Bank of England waiting for its rate rises to cool consumer spending in the fight against inflation, there was little in the trading update to ease the nerves of under-fire BOE governor Andrew Bailey.
Customers were not cutting back. Seasonal summer sales were strong, particularly for health and beauty products. In the 12 weeks to May 27, like-for-like sales, from stores open at least a year, were up 7% and total sales up 13%. ABF also said the rises were “supported by higher average selling prices”.
And there were also signs sales were picking up speed in June, after the end of the period covered by the trading update and the month in which the BOE took interest rates up to 5% in a jumbo-sized move of half a percentage point.
ABF’s finance director, Eoin Tonge, was asked by Reuters if trading in June had been better, and replied “absolutely”. He added: “Every quarter that’s gone by, it keeps on reminding us that the consumer has been more resilient than the doom and gloom.”
Overall, ABF expects annual profit to be “moderately ahead” of the £1.4 billion it made last year. It previously only expected to match the figure. The company also owns a range of food brands including Twinings tea and Kingsmill bread. But it is now best known for Primark, which revolutionised fashion retail with its low-cost, cutting edge range.
Richard Hunter, head of markets at Interactive Investor, said: “Primark continues to hit the right price point for cost-conscious consumers,” adding:
“Of course, any further deterioration in the economic backdrop could weigh further on consumer sentiment, while central banks attempt so far unsuccessfully to put the inflation genie back in the bottle. Even so, one thing which has become apparent over recent months is the British insistence on taking holidays, as evidenced by improving airline and travel numbers, which is often accompanied by a revamp of the wardrobe.”
Among the seasonal trends that kept the tills ringing in early summer, was demand for linen dresses, trousers and blazers. With so-called “boho” back in fashion, Primark shoppers snapped up its “Hip Trip” collection, including printed shirt dresses.
As Britons prepared to head off on holiday in one of the first summers free of travel restrictions since Covid, suitcases were the second most searched for item on Primark’s website.
