British fast-fashion chain Primark has no other choice but to charge more for some products.
In a Nutshell: “Looking further ahead, inflationary pressures are such that we are unable to offset them all with cost savings, and so Primark will implement selective price increases across some of the autumn/winter stock,” George Weston, CEO of Primark parent Associated British Foods (ABF), said. “However, we are committed to ensuring our price leadership and everyday affordability, especially in this environment of greater economic uncertainty.”
The company said in January that it would cut 400 jobs at Primark in response to flagging sales. There was talk of price increases at the time, but ABF chief financial officer John Bason said at the time that they wouldn’t apply to spring/summer goods since that pricing was “locked and loaded.”
On Tuesday, Bason confirmed to Reuters that spring/summer pricing would remain unchanged, but he didn’t go into detail on how high the increases could go. “We will absolutely ensure that we are the best value around, that’s not going to change,” he said.
Primark isn’t the only one making these decisions. Competitor Next Plc in January said consumers would be paying 3.7 percent percent more for spring/summer products, with a 6 percent lift planned for fall/winter items. However, other fashion brands jumped on the price game sooner. At Capri, Michael Kors raised prices last year, while Versace prices are slated to climb this year. On Running last year said it would raise prices for 40 percent of its Spring 2022 North American product line. Express and Lululemon are similarly looking at adjusting their prices.
For the first half, ABF said sales in the U.K. and Ireland saw “strong sales recovery with increased holiday travel and socializing,” while consumer footfall in Europe remained weak, although sales in the U.S. were trading well. It launched a new website but still doesn’t have e-commerce.
Meanwhile, footfall data firm Springboard said foot traffic across U.K. retail destinations for the week of April 17-23 fell by 7.0 percent from the prior week when activity around Easter Sunday drove an uptick.
“The overall result for last week was significantly impacted by drops in footfall on both Easter Sunday—when stores were closed—and on Easter Monday, when only retail parks recorded an increase in footfall, most probably driven by shoppers restocking on food and groceries following the Easter weekend,” Diane Wehrle, Springboard’s insights director, said.
Net Sales: Group revenue for ABF rose 25 percent to 7.882 billion pounds ($9.95 billion).
“This half year sales and operating profit for the Group returned to pre-COVID levels. Our people have responded well to the many challenges we faced,” Weston said.
At Primark, sales rose 59 percent to 3.540 billion pounds ($4.47 billion).
Earnings: The company said earnings before tax for ABF rose 131 percent for the first half to 635 million pounds ($802 million). Earnings per share jumped 194 percent to 60.3 pence ($0.08).
CEO’s Take: “Notwithstanding the inflationary pressures we are experiencing, our outlook for the year is for significant progress in adjusted operating profit and adjusted earnings per share for the Group,” Weston said.