THE price of Primark clothes will not increase despite rising costs in the supply chain, the finance boss of owner Associated British Foods (ABF) has said.
John Bason, finance director of ABF, said shoppers will not pay more for its clothes but there are likely to be price rises within its food business. The company said it has seen significant pressure on pricing in its food operation, highlighting that this has pushed the price of its Mazola oil higher.
ABF said Primark has also seen inflationary pressure as “port and container freight disruption” has caused supply issues when transporting its products made in Asia and other regions.
The consumer giant said it is experiencing “some delays” to the stock of autumn/winter season inventory as a result.
However, Bason said the group has “no worries” about stock levels for Christmas and this is not expected to impact upon customers.
“There has been supply chain disruption but our team has worked incredibly hard to mitigate this so I don’t anticipate this being an issue for customers,” he said.
“We are definitely seeing a lot of inflationary pressures in different parts of our supply chain, but there is absolutely no intention to put prices up in Primark because of it.
“Lower staff costs and operating costs have helped us to offset this.”
Last week, homeware retailer Dunelm said it has already increased the price of some products after seeing costs climb higher.
Bason said the group’s food operation has largely avoided the impact of wider labour and driver issues but said commodity prices have affected some products.
“Primark won’t be affected by price rises, but our food businesses have seen a lot of inflation so this is different in this area of the company,” he said. “For example, corn prices have risen heavily so our Mazola corn oil has gone up in price.
“We have had to accept that there will be increases in food prices but will continue to do what we can to mitigate the impact on customers.”
The price warning came as the group upgraded its profit guidance but said that recent Primark sales have been below expectations after Covid isolation affected customer sentiment in July.
The owner said sales at the discount fashion chain were “lower than expected” in recent months after footfall was affected by rising coronavirus cases.
However, the group also upgraded its profit guidance for the past year as Primark benefited from lower store labour and operating costs in the latest quarter.
Investors were told yesterday that profits for the past financial year are set to surpass figures for the previous one, after strong profit performances by Primark and its grocery business.
Primark is expected to reveal sales worth around £3.4 billion for the half-year to September after momentum was dented slightly in the summer, the company said.
“Correspondingly, like-for-like sales showed a consistent improvement through the period from a decline of 24% in the first four weeks of the quarter to a decline of 8% in the last four weeks.”
For the fourth quarter as a whole, the company expects to see a 17% decline in sales compared with the same period from 2019.
It added that it is currently experiencing “some delays” to the stock of autumn/winter season inventory due to “port and container freight disruption”.
Covid-19 restrictions have also “held back” the company’s progress on developing its pipeline of new stores, with difficulties in assessing and evaluating new sites and negotiating with potential landlords, it said.
Meanwhile, ABF’s grocery revenues are expected to be ahead of last year, receiving a boost from growth in its Twinings and Ovaltine drinks businesses.
It added that its AB World Foods, Silver Spoon and Westmill businesses saw sales significantly ahead of pre-pandemic levels and continued their sales bounces from last year.
However, sales reduced at its Allied Bakeries arm - which makes Kingsmill bread - after the end of a supply deal for the Co-op supermarket chain.
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