Associated British Foods today warned of lower profit next year, as its Primark fashion brand contends with worsening costs and increasingly cautious customers who are dealing with an income squeeze.
The news sent its shares to nearly a decade low in London trade.
Primark is one of Europe's biggest fast fashion chains and trades as Penneys here,.
It said it will limit price hikes next year as parent ABF said it was likely that customer's incomes will reduce further as inflation worsens.
That decision, along with soaring energy, raw material and labour costs, and a stronger dollar that have pushed up its purchasing costs, would squeeze margins at Primark, it said.
Shares in the FTSE 100 company tumbled more than 8% to nearly a decade low. They have lost more than a quarter of their value so far this year.
"This could act as a 'reality check' for the sector," said analysts at JPMorgan.
"Being a reminder that whilst the extent of the consumer demand shock might not be as bad as previously anticipated given government support, there are material margin headwinds facing retailers into the coming year," they added.
Rising global inflation, partly due to soaring energy costs following Russia's invasion of Ukraine in February, has pressured businesses and consumers alike, forcing central banks to hike interest rates and governments to lend their support.
ABF's profit warning comes as the group's performance this financial year ending September 17 improved significantly from pandemic-hit year ago figures. It kept its outlook for this year unchanged.
Total sales for Primark is expected to be some £7.7 billion this financial year, about 40% ahead of a year ago.
ABF said it would consider in November whether or not it had surplus cash to return to shareholders this year.
The British company said it would take "significant" actions to cut costs, including improving store "labour efficiency".
It would also review options for its German operations in the coming months as that market has struggled to return to pre-Covid levels.
Primark launches first ever menopause range
Primark has launched its first collection of nightwear, underwear and base layers which use the latest product innovations including anti-flush technology, cooling yarn and temperature control designed to relieve symptoms such as hot flushes and sweating that are associated with menopause.
The launch is the latest in a series of bespoke products specifically designed to support women from different life stages.
Ann-Marie Cregan, Trading Director at Primark, said the company was aware of the many different challenges the menopause can present to women.
"As part of our overall ambition to support women through all of their life stages, and tackle everyday taboos, we recognised that specialist products weren't accessible or affordable to everyone and we wanted to change this," Ms Cregan said.
"This range has been two years in development and testing to ensure we created innovative and novel products designed specifically to relieve one of the most frequent symptoms associated with menopause, hot flushes," she added.