- Oops!Something went wrong.Please try again later.
Primark has warned that it will increase prices on its autumn and winter collection as costs go up for businesses around the world.
The budget fashion chain will make “selective” rises in the range, having avoided most pressures from inflation until now because global exchange rates fell in its favour.
But AB Foods, which owns Primark and Twinings and is also a major sugar producer, said the US dollar is strengthening and inflation is soaring, which will force the changes.
We are committed to ensuring our price leadership and everyday affordability, especially in this environment of greater economic uncertainty
George Weston, AB Foods
Chief executive George Weston said: “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.
“However, we are committed to ensuring our price leadership and everyday affordability, especially in this environment of greater economic uncertainty.”
Millions of businesses across the UK are having to make decisions about their prices.
“The cost of the energy they need to operate has rocketed in recent months, and the costs of the raw materials and staff they need are also rising.
It has meant some choosing to pass on these costs to customers, though many are wary as this is likely to discourage people from shopping with them.
John Bason told the PA news agency that soaring gas prices have particularly driven the company to plan price hikes later in the year.
“We had not originally expected the level of inflation to last as long as we are going to see,” he said.
“The situation in Ukraine means industrial gas prices have jumped six-fold so meant we have had to reassess pricing.”
However, despite price rises, Primark expects to see its sales increase because it is opening more stores, expanding its so-called selling space by 10% compared with the end of the 2019 financial year.
“As a consequence, total sales for Primark in the second half are anticipated to be ahead of the second half of the 2019 financial year, which was pre-Covid,” AB Foods said.
The company added that it has seen a fall in Twinings retail sales over the past six months compared with a year earlier when people were drinking tea at home.
But this was offset by the launch of new products in its Wellbeing range of teas.
AB Foods’ pre-tax profit rose 131% to £635 million in the six months to the start of March, as revenue rose by a quarter to £7.9 billion.
Mr Weston said: “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.
“Our food businesses have once again proved their operational resilience and sugar had another strong period, building on its recent track record of recovery.
“Measures to mitigate higher costs in all our businesses have been taken and more are planned.
“Primark delivered a significant increase in sales and profit, with stores now open and trading largely free of restrictions.”
Keith Bowman, investment analyst at interactive investor, said: “In all, inflationary cost pressures are proving an increasing headache.
“The lack of a significant online presence over the course of the pandemic contrasts with that of clothing rival Next, whilst economic uncertainty and geopolitical tensions continue to warrant consideration.
“On the upside, both overall group sales and operating profit have returned to pre-Covid levels.”
Shares in the company were 4.5% lower at 1,556.5p after early trading.