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Primark’s owner, Associated British Foods (ABF), has warned of lower profits for the next fiscal year due to cost inflation, higher energy costs, and market volatility following the strengthening of the US dollar at the end of this quarter.
Primark’s operating profit margin is now expected to be lower than the operating profit margin of 8% expected for the second half of this financial year, although ABF’s outlook for this financial year remains unchanged with an expected full year operating profit margin of 9.6%.
ABF said that against this current volatile backdrop and declining disposable income for consumers due to inflation, the group has decided not to implement further price increases next year beyond those already actioned and planned.
The announcement comes as ABF announced that Primark’s total sales are expected to be some £7.7bn for the 52 weeks to 17 September 2022, 40% ahead of reported sales last year.
Overall, Primark’s like-for-like sales in the UK improved in the Q4 to achieve close to pre-Covid levels, although like-for-like sales in Continental Europe have been weaker than expected in the quarter.
The retailer’s “much higher revenues” reflect the ending of Covid-related restrictions and the resumption of “more normal” customer behaviour.
