Primark owner suffers billion-pound inflation blow

AB Foods, which owns fast-fashion chain Primark and food brands like Twinings tea, has grown considerably last year despite inflation costs. The group profited from the post-pandemic recovery, even though consumer confidence remains very low.

Inflation costs dearly

Associated British Foods posted double-digit growth for both turnover and profits: turnover rose 22 % to 17 billion pounds in the financial year ending 17 September, while pre-tax profits climbed 48 % to 1.07 billion pounds – despite the skyrocketing inflation costing the highly diverse group as much as a billion pounds. AB Foods includes fashion chain Primark as well as food brands Twinings and Ovomaltine, and is also a major producer of sugar and agricultural products.

Fashion subsidiary Primark recorded a sales rise of 43 % to 7.7 billion pounds last year, which was mainly due to the post-pandemic recovery. Shoppers in the United Kingdom, in particular, returned to the stores in great numbers. While British sales are back to pre-pandemic levels, sales are still lagging in continental Europe: partly due to the heatwave this summer, partly due to uncertainty following the invasion of Ukraine.

Primark says it is making digitisation a priority in the future. The chain has launched a new website for the UK, where customers can use click&collect for 25 shops. These are the first online steps by the chain, which until now stubbornly refused to have anything to do with e-commerce.

Primark freezes prices

For the coming months, the group warns of challenging and volatile economic conditions. CEO George Weston maintains his intention not to raise prices next year, even though he realises this will eat into margins. However, input costs and exchange rates are too volatile to align prices with yet, the CEO believes: costs will just have to be recovered in other ways.

AB Foods’ food division saw sales grow 10 % this year (excluding exchange rate effects). However, margins fell as prices could not keep up with cost increases. For next year, the group nevertheless expects a stable profit evolution.