Consumer demand slow down at Primark

More evidence of the squeeze on household budgets emerged today after the owner of Primark revealed a "noticeable" slowdown in UK consumer demand.

Associated British Foods said the discount fashion chain's half-year sales rose 3% on a like-for-like basis - half the level achieved during its previous financial year.

AB Foods said while Primark traded well ahead of Christmas despite the snow chaos, the mood had changed among UK shoppers since the start of the year.

It is also battling against an ongoing squeeze on profit margins since the new year VAT rise and impact of soaring global cotton prices.

The update comes after a long period when Primark has weathered the recession and consumer downturn with forecast-beating sales growth.

Consumers are reining in their spending as they come under pressure from the VAT hike, as well as soaring petrol prices.

John Bason, finance director at AB Foods, said it is a trend he expects to see mirrored among other retailers this year.

He said: "Even for people who don't feel they will lose their jobs, they will feel they are being squeezed.

"It won't just be Primark, but we'll see it for a number of retailers."

Primark has been the group's star performer in recent years as it has ridden the boom in demand for budget clothing on the high street.

But today's news highlights the pressure on cut-price retailers since the VAT rise to 20% and as rising inflation takes its toll.

AB Foods, which has been cautioning over the impact of input prices in recent months, confirmed Primark's first-half profit margins will be lower than a year earlier and will remain under pressure in the second half.

The group said the division would see underlying earnings ahead of last year, although today's news suggests it will be less than expected in the market.

The wider group - including household brands such as Silver Spoon sugar, Kingsmill bread and Twinings tea - will also see interim underlying earnings ahead of last year as its other businesses saw a better first half for trading.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Recruitment Resourcer

£20000 - £21000 per annum + uncapped commission: SThree: As a graduate you are...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: A Customer Service Advisor is r...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Day In a Page

Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn