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 Alan Rickman admits editing 'terrible' script with friends in Pizza Hut behind backs of writers on Robin Hood: Prince of Thieves
- 2 18th century sex toy found in 'toilet of sword fighting school' in Poland
- 3 US? China? India? The 10 biggest economies in 2030 will be...
- 4 'I wish my teacher knew...': Young students share their 'heartbreaking' worries in notes
- 5 Rebecca Francis accuses Ricky Gervais of using 'influence' to target female hunters after receiving barrage of death threats
General Election 2015: David Cameron catching up in polls – but he badly needs a clear lead
Alan Rickman admits editing 'terrible' script with friends in Pizza Hut behind backs of writers on Robin Hood: Prince of Thieves
South Africa xenophobic attacks: Shops looted and violence on streets of Johannesburg as foreigners are forced to hide in police stations
18th century sex toy found in 'toilet of sword fighting school' in Poland
'I wish my teacher knew...': Young students share their 'heartbreaking' worries in notes
The only black face in the Ukip manifesto is on the page about overseas aid
If I’m being racially abused I don’t need a stranger with a saviour complex to rescue me
Ukip is the only main political party to not address LGBT rights in its manifesto
Food banks: One million Britons will soon be using them, according to Trussell Trust
BBC election debate: The one photo that summed up the whole 90-minute leaders debate
Religion isn't growing, it is becoming vigorous in its demise, says philosopher AC Grayling
iJobs Money & Business
£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...
£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...
£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...
£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...