(qlmbusinessnews.com Wed. 6th Nov, 2024) London, UK —
Chancellor's Budget Sparks Investment Concerns for Primark Owner ABF
The parent company of Primark, Associated British Foods (ABF), has suggested that the latest Budget might lead to a greater focus on international investments amid concerns that tax hikes could weigh heavily on the UK High Street.
ABF's chief executive, George Weston, stated: “As an international company, we have options regarding where we allocate investment.” This comes as the fast fashion retailer reported a 43% jump in pre-tax profits, hitting £1.9 billion for the year ending 14 September.
Primark's performance was dampened earlier in the year by “challenging weather,” particularly affecting foot traffic from April to June. However, the company is optimistic about its prospects for the Christmas period.
The company’s update to investors highlighted concerns about rising costs, driven by new financial measures announced by Chancellor Rachel Reeves in Labour’s first Budget in over a decade. The Chancellor's reforms, including a rise in employers' national insurance contributions, are set to increase ABF’s wage expenses by tens of millions.
Weston expressed particular frustration, noting: “This Budget clearly places the burden of tax increases on businesses, and the High Street is shouldering much of it.”
Chancellor Reeves defended her approach, acknowledging criticism but emphasising the need for robust public finances. She insisted that the measures were necessary to secure economic stability.
Despite facing higher operational costs, Weston confirmed that Primark would not raise prices for the rest of the year, a relief for consumers battling inflation. In the UK and Ireland, Primark’s sales edged up by 0.7% over the year, discounting the impact of new store openings. Womenswear items, such as sportswear, jumpers, and pyjamas, were standout performers, while men’s shirts and leisurewear also saw strong sales growth.
Elsewhere in the fashion sector, Asos reported deepening losses of £393 million for the year ending 1 September. The online retailer has been implementing a turnaround strategy, reducing inventory and offering clearance sales to manage old stock. Chloe Collins from GlobalData pointed out that Asos has struggled against competition from brands like Shein and the booming second-hand market, led by platforms like Vinted.
Despite this, Asos CEO Jose Antonio Ramos Calamonte remains optimistic, citing positive momentum in the performance of newly launched collections. “We are committed to doing things right and will remain patient,” he assured.
The British Retail Consortium (BRC) has also voiced concerns, describing October as “disappointing” for retailers. BRC data indicated only a 0.6% year-on-year growth in total UK retail sales, down from the 2.6% increase seen in October 2023. BRC chief Helen Dickinson suggested that delayed spending, driven by half-term timing and cautious consumer behaviour amid economic and energy concerns, may have impacted October figures, with hopes for a boost in November.
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