Primark flags - but still trounces M&S

Even Primark is seeing a slowdown - but it's still showing rivals a clean pair of inexpensive heels...

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Last Updated: 06 Nov 2012

Primark’s parent company Associated British Foods said today that last quarter sales at the budget clothing retailer were 14% up on this time last year – pretty good figures on the face of it. However, much of this growth came from an increase in retail space, with two more stores in the UK taking its total to 179. ABF was keeping mum about like-for-like figures, but house broker Credit Suisse suggested sales were ‘broadly flat or just the right side of flat’ - suggesting that even the mighty Primark is starting to feel the squeeze from the high street slowdown...

The prevailing wisdom in recent months has been that as money gets tighter, shoppers will start trading down from the more expensive retailers, preferring to snap up bargains at cheap-and-cheerful alternatives like Primark instead (that certainly seems to be true in food retail, where the recent success of Aldi and Lidl has contrasted sharply with the struggles of M&S). Primark, the big high street success story of recent years, has been wooing customers from its big-name rivals for ages – and with like-for-like sales up 4% in the previous quarter, it appeared to be cashing in.

However, times obviously got tougher last quarter. ABF admitted like-for-likes were hit by a weaker showing in April, which it blamed partly on the weather (as retailers usually do) and partly on the fact that Easter fell in that month the previous year. But it insisted that Primark's trading had been ‘resilient… against a deteriorating consumer background’, and said that it was continuing to take customers away from the likes of M&S. Oh, and it wasn’t using child labour sweatshops any more, honest. ‘Primark cannot be immune from what is going on in the high street, but despite that our sales and our growth have held up pretty well,’ FD John Bason insisted to the Times this morning.

Still, none of this prevented ABF's share price falling today. This might seem a bit rough given that the overall group (which also covers sugar, agriculture, and groceries like Twinings tea) recorded a 19% increase in revenues compared to last year – a more-than-respectable performance. But with Primark accounting for about a third of its profits last year, even the merest hint of a slowdown was always going to go down badly in such a jittery market.

The fact remains that even flat like-for-like sales is a pretty good showing for a retailer in the current environment. But Primark will be hoping that the slowdown doesn’t actually encourage people to trade up to higher-quality items. After all, remember what your Gran told you: buy cheap, buy twice...


In today's bulletin:
Primark flags - but still trounces M&S
'35 Women Under 35' party the night away 
AMEC wins £7bn Sellafield clean-up job
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