Primark will raise prices on selected items
Primark will be forced to raise prices in its second half as it is unable to offset rising costs.
The fashion giant had managed to keep prices static in spring/summer, however, it admitted it will “implement selective price increases” across its autumn/winter stock.
However, George Weston, chief executive of Primark owner Associated British Foods (ABF) said it was “committed to ensuring our price leadership and everyday affordability, especially in this environment of greater economic uncertainty”.
Owner Associated British Foods flagged logistics challenges, Covid-related absences and “significant inflation pressures” across all of its businesses.
Despite the price rises, Primark expects its full-year margin to be hit. It’s margin was 11.7% in the first-half but the group expect this to come in at around 10% for the full year.
The price rises come despite Primark’s “strong recovery in sales and operating profit margin” post-Covid.
Primark’s performance was much improved following the relaxing of government restrictions, and over the 24 weeks to 5 March surging 59% to £3.54 billion.
Adjusted operating profit soared to £414 million, compared to the £43 million made last year.
The retailer said although like-for-likes had improved over the period when compared to the final quarter of 2021, they were 10% lower than pre-Covid levels with the emergence of Omicron disrupting sales in the middle of the half.
However, it flagged a strong pick up in like-for-likes in the UK and Ireland since then. It said UK sales were well ahead of last year, and 8% below two years ago although have improved since the period end.
Recovery has been slower in for Primark in Continental Europe where some restrictions have persisted for longer and consumer footfall has remained weaker.
The group said it expected Primark’s second half total sales to be ahead of 2019’s pre-Covid levels.
The retailer highlighted strong sales of luggage and holiday essentials such as swimwear and sandals as customers plan holidays. Meanwhile, health and beauty staged a recovery as customers returned to socialising with false eyelashes and nails performing particularly well.
Weston said: “Primark delivered a significant increase in sales and profit, with stores now open and trading largely free of restrictions. Notwithstanding the inflationary pressures we are experiencing, our outlook for the year is for significant progress in adjusted operating profit and adjusted earnings per share for the group.”