Clothing retailer Primark has reported better than expected trading over the Christmas quarter, parent Associated British Foods said today, but cautioned economic headwinds may dent consumer spending in 2023.

Primark trades as Penneys here.

The group said Primark's revenue was £3.15 billion in the 16 weeks to January 7, up 15% on a constant currency basis as it benefited from "very strong" trading in the run-up to Christmas.

Last week, official UK data showed inflation-pinched consumers cut their shopping by the most in December in at least 25 years, but some retailers exceeded expectations, including those aimed at the value end of the market.

AB Foods said consumer spending had proven more resilient in the quarter than anticipated at the start of its financial year.

"To date, Primark trading has been good in all our markets and was ahead of expectation," it said.

"Early trading in this new calendar year has been encouraging but macro-economic headwinds remain and may weigh on consumer spending in the months ahead," it added.

Last September, Primark said it had decided to limit further price increases in 2022-23 beyond those already planned, seeking to maintain its value credentials among consumers.

AB Foods, which also owns major sugar, grocery, agriculture and ingredients businesses, said its total revenue was £6.7 billion over the 16 weeks, up 16%.

The group, whose shares have fallen 8% over the last year but are up 18% over the last month, maintained its guidance for "significant growth" in sales in 2022-23 but with adjusted operating profit lower than the £1.44 billion made in 2021-22.

It said it continued to encounter significant cost pressures but inflation had become less volatile and recently some commodity costs had declined.

Sales in the group's grocery business, which includes Twinings tea, Jordans cereals and Ovaltine drinks, rose 9% to £1.39 billion over the 16 weeks.

The group said the full year operating result at AB Sugar was now expected to be broadly in line with the previous year as a result of a much-reduced UK sugar crop.

Meanwhile, the maturity of Britain's online clothing market should be questioned after its share retreated in the Christmas trading period, the finance chief of Primark's owner said today.

"You've got to start to question the maturity now of online," John Bason, finance director of Associated British Foods, told Reuters, highlighting a fall in online clothing's share of the market.

Primark does not trade online but is trialing a Click & Collect offer of children's products.

After two years of Covid-19 pandemic restrictions, a feature of Christmas 2022 was a return of shoppers to physical stores.

"The way that Christmas has played out, the relevance of Primark is absolutely there. The numbers say it for us," said Bason.

He said Primark's proposition of affordable prices and a store experience was proving increasingly appealing to both existing and new customers.

Primark to open its first store in Hungary - its 17th market

Primark has today announced plans to open its first store in the Hungarian capital of Budapest.

The first Primark store in this new market will be located on the east side of Budapest, in one of the city's largest shopping centres, Arena Mall.

It said its expansion into Hungary shows the retailer's continued investment and commitment to the Central and Eastern Europe region, following store openings across Slovenia, Poland, Czech Republic, and most recently Romania.

With plans to open its first store in Slovakia later this year, Hungary will become Primark's 6th market in CEE and its 17th market globally.

Primark currently has 416 stores across 15 countries in Europe and the US.

By the end of 2026 the company expects to grow its store portfolio to 530 globally.

Paul Marchant, Primark's chief executive, said the company has made great progress in its expansion plans across the CEE region and the customer response to the stores has been very positive.

"Arena Mall is one of Budapest's biggest and busiest shopping malls, giving us a fantastic opportunity to introduce our unique in-store shopping experience to more customers," he added.