These latest results show just how popular Primark has become among its target market: the company has opened another 10 stores over the last few months, bringing its total up to 214. It’s easy to point to its recession-friendly prices as the reason for it doing so well – but given that competitors in a similar market, such as New Look (which makes similarly cheap catwalk copies), have had to issue profit warnings after the cold snap hammered sales, that might not be the only cause of its success.
ABF, which also owns brands like Ryvita, Ovaltine and Kingsmill, reported a total sales growth of 9%, which it said was mainly led by beverages. But it warned that a resurgence in the popularity of commodities is having a ‘mixed impact’ on business. While higher cotton prices (on top of higher VAT) are going to eat into Primark’s profits, it’s planning to raise prices across its bakery range to make up for higher wheat prices. And while Primark managed to ward off the bad weather, ABF’s British Sugar division had no such luck. The firm, which usually produces more than 1m tonnes of sugar a year, has struggled after the cold snap was followed by a sudden rise in temperatures. ABF said there shouldn’t be too much to worry about because it’s already processed 75% of its crop – but that last quarter could cause problems, with analysts suggesting it could cost the company as much as £20m.
So, some cause for concern for ABF – although as long as there’s demand for skinny jeans that cost less than £10, it shouldn’t have too much to worry about.