Primark Holds Prices Steady After Rita Ora Helps Lift Sales

Primark is holding the price of its clothing steady this spring, after price rises in 2023, as the retailer said consumer spending remains fragile and some of its costs were falling.

The cut-price fashion chain said sales at established stores in the UK rose 3.8 percent in the 16 weeks to 6 January as prices rose by about 3 percent and more shoppers bought its slightly pricier The Edit and Rita Ora ranges.

Globally Primark’s sales rose 7.3 percent to £3.4 billion in the period, helped by store openings in the US and Europe.

The amount of clothing sold fell back as a warm autumn and tight household budgets put off shoppers – although Primark said sales picked up strongly just before Christmas when cold weather hit.

“The pricing power of the consumer is still fragile,” said Eoin Tonge, the finance director of Primark’s parent group, Associated British Foods (ABF). “[The world] is not in a strong consumer place at the moment. [Outside the UK] it is even tougher.”

Primark’s pace of growth slowed in the autumn but the store-only seller’s growth was another sign of the high street’s win over online clothing specialists at Christmas.

While major retailers that can offer online orders and a vast network of stores – such as Marks & Spencer and Next – did well over the festive period, those more reliant on web traffic or with weaker brands struggled.

On Tuesday, the fast fashion website Boohoo said it had traded in line with expectations over Christmas – which were for a sales fall of up to 17 percent despite inflation – as it battles heavy competition from rapidly growing Chinese sellers such as Shein as well as a return to high street shopping, particularly among young people.

Quiz, which makes almost a third of its sales online, also revealed that sales in December were down 11 percent on the same month a year before, which it said reflected the “negative impact of inflationary pressures on consumer demand which resulted in declines in traffic both in-store and online”.

Tonge said Primark had gained its highest value UK market share to date as hard pressed shoppers turned to the cut-price chain. It was helped by a new online stock-checking service, click and collect on some products in 50-plus UK stores and sought-after lines such as the Rita Ora collection.

“Our average selling price has been going up for about 12 months. We are out of that now and we don’t expect any more price increases. It is a question of whether we will start to see prices decreasing,” Tonge added.

The cost of materials, such as cotton, and of manufacturing goods is coming down but staff costs are increasing. Tonge said wage rises would have greater impact than the additional cost of shipping driven by container ships having to travel around Africa because of attacks on vessels off the coast of Yemen, which are discouraging many from transiting the Red Sea.

“This is not like Covid when all ports were having problems. This is one shipping [route] and most have just changed line. It is relatively adaptable,” Tonge said. He said the alternative route added two weeks to transit and would be more expensive. He thought this was “another reason that prices won’t come down soon” but added “we don’t think it is material and we will just have to absorb it”.

ABF promised City analysts that Primark could stick to its plan to rebuild profit margins after last year’s drop, despite the freight issue, as analysts at Barclays said: “We doubt the impact would exceed £20m unless the situation in the Red Sea were to significantly worsen.”

Tonge said there was still inflation on food but he expected prices to begin to fall by the end of 2024.

“Commodities and energy have come down significantly and that was a big driver of inflation,” he added.

While labour costs were still rising, he said: “The trend on food inflation will continue to come down and I think we will go into deflation.”

By Sarah Butler

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