Primark owner Associated British Foods said it expects the retailer’s profit margins to suffer next year due to rising energy costs.
In a trade update on Thursday morning, the retailer said it expected Primark’s profit margin to be lower than expected as the budget channel opted to limit further price increases.
ABF acknowledged “decline in disposable income” for buyers due to historically high levels of inflation.
He said he expected total sales for this financial year to be around £7.7billion for his retail arm, 40 per cent higher than reported sales for the year. last. Shoppers returned to stores after Covid measures eased and social occasions returned.
The retailer said it would not introduce any further price increases next year “beyond those already taken and planned” to support its affordable position in the market.
The fashion chain previously said it would be making “selective” increases to its current seasonal range.
ABF’s share price was down eight percent on Thursday afternoon.
The retailer has already “managed to fend off those pressures quite adeptly,” noted Susannah Streeter, senior investment and market analyst at Hargreaves Lansdown.
However, its reluctance to pass on the pressure of inputs to the places of consumption leaves its margins and profits vulnerable.
Known for its cheap clothes, Primark “clearly doesn’t want to put its value at risk” as retailers scramble to retain shoppers looking for affordable items.
Its food business was expected to post profits before this year “with further significant input cost inflation and price action.”