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Primark is implementing selective price increases across some of its autumn/winter stock amid inflationary pressures as the retailer’s owner, Associated British Foods plc (ABF), said the company is unable to offset all of the inflationary pressures with cost savings.
In its latest trading update for the 24 weeks ended 5 March 2022, Primark reported year-on-year sales growth of 59% from £2.23m to £3.54m. Primark sales for the first half were “well ahead” of last year at constant currency at 64%.
Additionally, adjusted operating profit surged from £43m to £414m year-on-year, with “strong” sales recovery with increased holiday travel and socialising in the UK and Ireland. ABF said consumer footfall in continental Europe “remained weak” while the US is “trading well”.
Primark saw “strong” sales of luggage and holiday items, such as swimwear and sandals, as customers returned to holiday travel. Sales of health and beauty also witnessed recovery as customers returned to socialising; false eyelashes and nails performed “particularly well”.
The retailer said trading improved following the relaxing of government restrictions on store operations. However, all of ABF’s businesses are reportedly experiencing logistics challenges, Covid-related labour absences and “significant” inflationary pressures in raw materials, supply chains and energy.
The end of the period saw these inflationary pressures increase further with the Russian invasion of Ukraine.
Meanwhile, Primark’s selling space at the end of this financial year will be 10% ahead of the selling space at the end of FY19. Consequently, total sales for Primark in the second half are anticipated to be ahead of the second half of pre-Covid levels.
Michael McLintock, chairman of ABF, said: “Reflecting further inflationary pressures, we now expect a greater reduction in the second half operating profit margin than previously expected although the full year Primark margin will be some 10%.”
George Weston, chief executive of ABF, added: “This half year sales and operating profit for the group returned to pre-Covid levels.
“We are committed to ensuring our price leadership and everyday affordability, especially in this environment of greater economic uncertainty.”
