Slowdown spreads to Primark
BUDGET clothes chain Primark is the latest high street retailer to suffer a slowdown in sales amid growing concerns about shoppers’ confidence.
Company figures show that, although it is still ahead of upmarket rivals such as Next and Marks & Spencer, it has not been immune to the general downturn.
A trading update from Primark’s parent company, Associated British Foods (ABF), coincided with a downbeat assessment of the retail industry by analysts at Wall Street bank Goldman Sachs, which sent shares across the sector falling.
ABF reported a 14 per cent rise in Primark sales in the four months to June 21, while 40-week sales were up 20 per cent.
Although it said the strong growth was driven by store openings, it failed to publish like-for-like figures, which exclude new space. But it did say underlying growth was hindered by weak trading in April when the weather was poor.
The era of throwaway fashion appears to be ending.
The stock market has become increasingly sensitive about current trading after M&S last week issued a profits warning following a 5.3 per cent drop in three months’ like-for-like sales.
Analysts estimated Primark’s underlying growth had fallen to zero, down from 4 per cent earlier in the year.
ABF finance director John Bason said of Primark’s performance: “Our trading continues to be very resilient, but there is no doubt we have a tough high street environment. We have seen downturns in the UK before and we have continued to trade well through them.”
Freddie George at broker Seymour Pierce said: “The era of throwaway fashion appears to be ending. Maybe the consumer is buying less but trading up.”
Goldman Sachs added to the negative sentiment surrounding the sector, saying it favoured established international brands. It downgraded Burberry, down 26dp to 403p, Debenhams, down bp to 34dp, and Next, down 5p to 895dp.
ABF, which also takes in brands such as Silver Spoon sugar and Patak’s curry sauces, said the group’s total third-quarter sales were up 24 per cent. Shares in ABF closed down 29dp to 738dp.