Brands | Business & Policy

Owner of Primark Updates View on Consumer Resilience

Published: February 28, 2023
Author: Fashion Value Chain

The company that owns Primark, Associated British Foods, increased its financial forecast on Monday, noting that consumer spending has been more resilient than anticipated.

Sales for the first half of the year ending on March 4 are forecast to total £4.2 billion ($5.0 billion), up 16% in constant currency, and the adjusted operating profit margin is now predicted to be above 8%, according to the firm. Primark has reportedly performed “far ahead” of forecasts.

It noted that early feedback on its spring and summer lines has been “extremely encouraging” and that “our proposition of outstanding quality at cheap prices and attractive shop experience is proving increasingly appealing to both existing and new customers.”

In an effort to maintain its reputation as a retailer that offers good value to customers, Primark stated in September of last year that it would restrict price rises in 2022–2023 beyond those previously anticipated.

The group, which also owns significant businesses in the sugar, grocery, agriculture, and ingredients sectors, predicted that total first-half sales would exceed 16 percent of the prior year’s level at constant currency, with adjusted operating profit expected to be roughly in line with that of the prior year.

The company claimed that its food operations, which include the retail brands Twinings tea, Jordans cereals, and Ovaltine drinks, continued to look for ways to recover inflation through cost-cutting and price rises.

AB Foods stated that company had previously estimated adjusted operating profit for the entire 2022–23 fiscal year to be less than £1.44 billion, but it now anticipates it to be about in line with that of 2021–22.

The group highlighted that, although inflation has become less erratic and recent commodity costs have decreased, recovering from significant input cost inflation would continue to be a management focus for the second half.

It stated that “consumer macro-economic challenges linger and may weigh on spending in the months ahead.”

At Primark, we are still sceptical about how well consumer discretionary spending will hold up in the face of ongoing cost of living inflation and rising interest rates.

Early trading saw AB Foods shares rise 2%, bringing their year-to-date gain to 24 %.

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