Star performer on the High Street Primark is struck by the retail blues in the critical run-up to Christmas
- Primark owner ABF warned today that trading was ‘challenging’ last month
- It said it still expects profits to rise and held firm on its full-year forecasts
- It’s a bad sign for other fashion retailers which are in need of a strong Christmas
Primark owner Associated British Foods (ABF) struck fear into the retail industry today with an admission that trading is ‘challenging’ in the run-up to Christmas.
The strong performing budget fashion chain, which has until now been broadly resilient to the wider retail slowdown, said its sales suffered in November as it too was stung by the ‘tough retail market’.
Primark’s owner said it found the retail market to be tough in November
The firm said it still expects full-year profits to increase, as a result of ‘careful inventory management and improved margins’, and is holding firm on its forecasts.
The warning of a slow November is bad news for the beleaguered retail industry, which would have been hoping for some festive cheer over the critical Christmas trading period after what has been a catastrophic 2018.
Several big names including Toys R Us and Maplin have gone bust, with scores of other retailers urgently closing stores to stay afloat.
Today’s update from Primark ‘will strike fear into fashion retailers’, said retail analyst Nick Bubb in his daily note.
‘If even Primark found November ‘challenging’ it would be interesting to know how hard it was for Debenhams and Marks & Spencer etc,’ he said.
ABF chairman Michael McLintock said Primark’s expansion will continue, with its 364th store opening in Belfast on Saturday. It follows the destruction of its existing site in a fire in August.
The firm also said the first eight weeks of its financial year, spanning September and October, ‘were in line with expectations’.
Analysts fear the warning from Primark means fashion firms could be in for a poor Christmas
Neil Wilson, chief market analyst at Markets.com said the Primark warning ‘is a worry’, as it could mean retailers are in for a ‘rough ride’ over the key Christmas period.
‘We know it’s tough out there. But Primark has done better than most and the fact that it too is facing severe headwinds is a concern for the sector as a whole.
‘If Primark is struggling, what chance does the rest of the high street have?’ he said.
ABF shares fell 2.5 per cent in early trading today, and the news is having a knock-on effect on other retail stocks too.
Marks and Spencer is down 0.5 per cent and Debenhams, which needs a big uplift from this festive season, is down 2 per cent.
Last month, ABF said full-year sales at Primark fell 2.1 per cent as bad weather knocked trading in Europe.