Sales growth at fashion retailer Penneys-Primark is expected to slow in the coming months, owner Associated British Foods said today, citing cost of living pressures and sending its shares lower.
The group also owns major sugar, grocery and ingredients businesses. Primark trades as Penneys here.
It reported a 3% fall in adjusted operating profit to £684m for the six months to March 4, reflecting delays in passing on higher raw material costs to its customers.
Its revenue for the six montsh rose 21% to £9.56 billion.
"At Primark, we remain cautious about the resilience of consumer spending in the face of ongoing inflation in the cost of living and higher interest rates," it said, forecasting a moderation in like-for-like sales growth in the second half.
AB Foods shares were down 5% so far today. They have gained 31% this year.
UK households are in the midst of the biggest two-year squeeze in living standards since comparable records started in the 1950s, according to government forecasters.
The group said it was focused on passing on some of its higher raw material costs to customers, although it noted that the price of some ingredients was starting to ease.
For the full 2022-23 year, it expects adjusted operating profit broadly in line with the £1.44 billion it made in 2021-22.
Full-year profit in the grocery business, which includes Twinings tea, Jordans cereals and Ovaltine drinks, was forecast to rise, benefiting from price increases and cost savings.
Profit in Ingredients was forecast to be "well ahead" of 2021-22 but was expected to fall at AB Sugar due to much lower UK production.
Primark, a value-focused fashion retailer, ended the first half with 419 stores, including 16 in the US.
The group said it planned to expand Primark into the southern US states anchored by a new warehouse in Jacksonville, Florida.
AB Foods said it would pay an interim dividend of 14.2 pence a share, up 3%.
Meanwhile, Associated British Foods does not expect to have to push through many more price increases to customers of its food businesses in the second half, its boss said today.
"We've achieved cost recovery in most areas now, so the second half will see much less (price rises)," chief executive George Weston told Reuters after the group reported first half results.
He said the second half would see the benefit of price rises pushed through to recover inflation in its own input costs.
"We've had 18 months of trying to keep up with these cost increases," he said.
Weston said sugar was likely to be an exception in the second half.
"Sugar customers will likely see higher prices. The price of sugar as a commodity globally is the highest it's been for some while," he said.
