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Primark to raise prices as cost pressures mount, Retail News, ET Retail

Primark to raise prices as cost pressures mountLONDON: Clothing chain Primark is set to raise prices due to severe inflationary pressures, its parent company Associated British Foods said on Tuesday, as it also warned on margins at its food businesses.

The group said cost pressures at Primark were such that it has been unable to offset them all with savings, and the business will therefore implement selective price increases across some of its autumn/winter stock.

The move underscores the balancing act the clothing industry is facing as it struggles to protect margins without denting demand amid the biggest squeeze on household budgets for decades.

“We are committed to ensuring our price leadership and everyday affordability, especially in this environment of greater economic uncertainty,” AB Foods Chief Executive George Weston said.

AB Foods, which also owns major sugar, grocery, ingredients and agricultural businesses, made adjusted operating profit of 706 million pounds ($900 million) for the 24 weeks to March 5, up from 369 million pounds in the previous corresponding period.

Group revenue rose 25% to 7.88 billion pounds.

The better outcome reflected all Primark stores remaining open throughout the period except for short spells in Austria and The Netherlands, compared to prolonged periods of store closure in the United Kingdom and Europe in the first half of the previous year.

Primark’s sales increased 59% to 3.54 billion pounds, while sales in the group’s food businesses rose 6% to 4.34 billion pounds. Its grocery brands include Twinings tea, Jordans cereals, Kingsmill bread and Ovaltine drinks.

The group said its food businesses are experiencing increasing inflationary pressures in areas including raw materials, commodities, supply chain and energy, which it has taken action to offset through operational cost savings and price increases.

It said commodity and energy prices have increased further following Russia’s invasion of Ukraine.

As a result, the group expects a greater margin reduction in its food businesses than previously expected for the full year.

Overall it still expects “significant progress” in adjusted operating profit. The group is paying an interim dividend of 13.8 pence, up from 6.2 pence.

Shares in AB Foods were down 2.7% at 0730 GMT.

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