Joe Brennan: Fast-fashion retailer sees cost-of-living crisis as an opportunity
And having already increased prices for its autumn/winter and upcoming spring/summer collections by an average of between 5-9 per cent, Weston signalled this week he’s prepared to sacrifice Primark’s profit margins, for now, to become the go-to location for cash-strapped consumers with a pledge not to increase its prices any further before next autumn.
Deutsche Bank analysts now estimate that Primark’s operating profits will dive almost 23 per cent this year to £584 million in the current financial year. While like-for-like sales in the Republic – which compares the performance of the same number of stores – had recovered to within 4 per cent of pre-Covid levels in the last financial year and those in the UK had clawed back to within 6 per cent, continental Europe sales remained off by 16 per cent.
The company has been forced to take a £206 million impairment charge against its assets in that country as it slides inexorably into recession. However, the conglomerate structure of ABF – including a groceries division that’s home to brands like Twinings teas, Blue Dragon Asian noodles and Ryvita crispbreads, as well as sugar, animal feed and bakery ingredients units – served shareholders well when most of Primark’s stores were closed during Covid.
But the diversified structure of ABF is also allowing Weston to make a bold call on keeping Primark prices on hold to court customer loyalty during a global downturn. It has also enabled it to announce this week that it is buying back £500 million of its own stock, following a 33 per cent slump in the share price in the first 10 months of the year.
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