Tis the season for festive jumpers, but it’s been a slow start for the festive season at Primark. Ahead of its annual general meeting Associated British Foods (ABF) stated that trading at Primark during November was “challenging”. But “careful inventory management and improved margins” are expected to offset most of the damage, and so ABF still expects Primark to report an increase in profits.
Any hint of trouble at Primark is worrisome. So far the budget retailer has helped to soften the impact of the profit decline in the sugar business. At the full year results in November profits from sugar had halved to £123m after the end of the EU’s quotas on sugar resulted in a ramp up in production across the industry, which pushed down prices. This effect is expected to worsen during the current financial year as the sugar business feels the first full year impact of the regulatory change. Chairman Michael McLintock said profit at AB Sugar will be “significantly lower”.
A period of soft trading has not deterred the company from pushing ahead with selling space expansion at Primark. Including a newly opened location in Belfast, Primark now has 364 stores and a total selling space of 15.1m square feet. At the preliminary results finance director John Bason said new stores in Europe cannibalised sales at existing sites, but argued that those shops had been "overselling" anyway – suggesting that demand remains high.
