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.
- 1 California man brutally beat 82-year-old Sikh grandfather he mistook for 'one of those people'
- 3 School kitchen manager 'fired from Colorado school for giving hungry students free lunches'
- 5 Charles Kennedy 'had better judgement drunk than many sober politicians' says Ian Hislop
California man brutally beat 82-year-old Sikh grandfather he mistook for 'one of those people'
Amber Peat: Body found in search for missing 13-year-old who left house after argument with her parents
School kitchen manager 'fired from Colorado school for giving hungry students free lunches'
Alton Towers closed after horror crash on The Smiler raises safety questions for theme park
Alton Towers crash: Four guests seriously injured as Smiler ride carriages collide
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination
Migrants in Kos: Photos show real tragedy after Brits abroad complain of 'awkward' holidays
British tourists complain that impoverished boat migrants are making holidays 'awkward' in Kos
Michael Gove determined to scrap the Human Rights Act – even if Scotland retains it
Threat to scrap Human Rights Act could see UK follow Nazi example, warns UN official
Church of England 'one generation away from extinction' after dramatic loss of followers
iJobs Money & Business
£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...
£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...
£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...
£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...