Primark has dominated out additional worth will increase “beyond those already actioned and planned”, in a bid to guard gross sales within the robust economic system.
The low cost retailer’s dad or mum agency Associated British Foods (ABF) made the announcement because it warned of decrease group income for its subsequent monetary 12 months, which begins later this month.
The firm mentioned that it anticipated Primark, which has carried out worth hikes this 12 months to replicate surging vitality prices, to face a spending slowdown as a result of price of residing disaster hitting clients in its core UK market.
It mentioned that whereas latest UK gross sales had proved resilient in its present fourth quarter – outperforming these in wider European locations – they remained at round pre-COVID ranges.
ABF mentioned vitality payments, the weak pound and euro relative to the greenback and its choice to restrict additional worth hikes would harm Primark and its margins subsequent 12 months.
The worth motion will probably be seen as a bid to guard its market share as shopper demand is examined.
It was revealed hours earlier than the brand new Liz Truss-led authorities ready to disclose an vitality worth freeze to assist defend shoppers and companies from future invoice shocks.
“We expect sales growth to be driven by the increase in retail selling space and like-for-like growth resulting from both the price increases implemented for autumn/winter this year and those planned for spring/summer next year”, its assertion learn.
“Primark has already been managing the challenges of provide chain disruption, inflation in uncooked materials and vitality prices and in labour charges, alongside the upper buying prices which have resulted from the strengthening of the US greenback over this monetary 12 months in opposition to sterling and the euro.
“To mitigate these pressures, in addition to the price increases mentioned above, there are also plans to improve store labour efficiency and deliver lower operating costs.”
It added: “Against this current volatile backdrop and a context of likely much reduced disposable consumer income, we have decided not to implement further price increases next year beyond those already actioned and planned.
“We consider this choice is in the very best pursuits of Primark and helps our core proposition of on a regular basis affordability and worth management.”
It anticipated Primark’s revenue margin for subsequent 12 months to be decrease than the working revenue margin of 8.0% anticipated for the second half of this present monetary 12 months, which ends on 17 September.
Shares fell 5% on the market open.
The group retained its outlook for 2021/22, with its meals enterprise – together with Twinings and Allied Bakeries – seeing stronger income as a consequence of greater demand and costs of elements.
Source: information.sky.com”