Primark should in many ways be well placed to weather the cost of living crisis, and shareholders will look for any impact that the squeeze on households will have when its parent, Associated British Foods (ABF), reports third-quarter results next week.
The business is hiking prices later this year, but it is unlikely to lose its crown as one of the cheapest clothes retailers.
Many brands may see customers leave for cheaper alternatives and end up in Primark, whose own customers may struggle to find lower prices elsewhere, so will continue shopping at the retailer, or cut back on clothes.
‘Inflation will be the word of the day when ABF reports,’ said Laura Hoy, analyst at Hargreaves Lansdown.
‘The buoyant half-year sales were back to pre-pandemic levels as stores reopened. The surge in demand fed through to a 92 per cent increase in operating profits but good times might not continue if rising costs continue to eat into margins.’
Inflation is at a 40-year high, hitting 9 per cent in April this year. New figures for May from the Office for National Statistics are out next week.
The high cost of energy is also feeding into business supply chains around the world.
Primark is no different. Bosses have already said that prices will need to rise this autumn to make up for soaring costs.
Hoy added: ‘Demand this year in the face of the current cost of living crisis will give us an idea of how resilient customers are.’ ABF also owns brands, such as Twinings tea.
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