WASHINGTON: Primark’s tightening margins could cause concern for its owner, Associated British Foods (ABF) and shareholders next week when the company releases its next trading update. Import costs have risen for the clothing retailer since the pound weakened, with 3 in every 4 of Primark’s purchase invoices being billed in US dollars. Yet the budget brand has resisted passing the cost onto its customers. Primark is understood to be preparing for difficult trading conditions over the next year, especially after its young women’s fashion lagged behind sales of menswear and kids clothing.
Credit Suisse predicted that Primark’s half-year profits would increase by just £10m in 2017, up to £323m, according to The Observer. However, ABF’s outlook remains positive, having reported a year-on-year sales increase at Primark of 11 per cent in the 16-week period to 7 January in the most recent trading update. Investment group Shore Capital predicted earlier this month that ABF would see earnings per share rise by 11.3 per cent over the next three years, and concluded that the costing problems in Primark’s supply chain were being effectively managed. Expansion of the Primark brand could also offset rising costs, with 1.3m square feet set to open in the coming year and new stores already trading in European countries and American cities.
