Primark warns profits will decline amidst cost-of-living crisis

Primark-owner Associated British Foods (ABF) has warned that profits at the budget retailer are likely to decline over the next year amid rising inflation.

The company said that it would not roll out further price increases “beyond those already planned” due to the volatile market and the likelihood of reduced disposable income for its customers.

In April, Primark said that despite strong sales growth recovery it would increase prices because of the 30-year high inflation rate.

The budget retailer recorded sales of £3.5 billion in the six months to 5 March.

ABF says that “significant volatility” in the market, a strengthened US dollar, and much higher energy costs would impact costs over the next 12 months.

Given these pressures, it said, Primark’s operating profit margin across the next financial year is now expected to be lower than the second half of 2022.

Total Primark sales for 2022 are expected to hit £7.7 billion, 40 per cent ahead of last year, driven by the end of Covid-related restrictions and customer behaviour returning to normal.

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