Primark owner says sales improving despite ‘consumer caution’

The parent firm of Primark has said the retail chain saw trading improve in recent months despite “consumer caution”, as its UK and Ireland stores recovered ground.

Associated British Foods (ABF) said Primark sales are set to have grown by 1% over the half-year to September 13, as womenswear and more favourable weather conditions helped support UK stores.

However, like-for-like sales are expected to have dropped by around 2% over the period but were offset by the group’s store expansion plans, with Primark opening 15 new stores including two in the UK.

Primark sales were also strong in the US but were weaker in Europe because of a “more subdued consumer environment”.

George Weston, chief executive of ABF, said: “I’m pleased with how the group has performed in the second half of our financial year in what continues to be a challenging environment, characterised by consumer caution, geopolitical uncertainty and inflation.

“Primark delivered improved trading in the UK and strong sales growth in the US, while trading on the continent was softer in a weaker consumer environment.

“In our food businesses, overall trading in the second half was in line with our expectations.”

The company said concerns over the wider economy were weighing on consumer sentiment.

Mr Weston told the PA new agency that household inflation and “fears about unemployment” were continuing to drag on shoppers in the UK, Europe and US.

He said Primark was not increasing prices despite recent cost increases.

However, he said ABF’s grocery business – which includes brands such as Ryvita, Twinings and Patak’s – had seen cost inflation of around 5% and was “having to pass on much of this” to customers.

ABF reported that grocery sales for the latest half-year are set to be “in line” with a year earlier, as growth of international brands was offset by weakness in its US oils and Allied Bakeries businesses.

The group has sought to turn around Allied, which is to report another operating loss in “challenging” conditions, after agreeing a deal to buy rival Hovis Group and merge the businesses.

Elsewhere, the group said it expects its sugar business to post an operating loss “close to £40 million”.

The significant loss will be partly linked to the closure of its Vivergo bioethanol plant in East Yorkshire last month.

ABF announced the closure of the site after failed negotiations with Government, with the firm criticising the Government’s decision to end the 19% tariff on American bioethanol imports as part of the recent UK-US trade deal, which would boost US competitors.