Primark forced to increase prices as surging inflation takes its toll

SHARES in Primark’s owner fell as it warned soaring inflation will force the discount fashion retailer to put prices up this year.

Associated British Foods pledged to keep Primark the UK’s best value clothing retailer, but said it cannot completely offset the inflationary pressure it is facing.

The group, which owns Twinings and Ovaltine, also warned absorbing some cost increases will leave it facing lower profit margins in the second half of its financial year.

Shares fell 5pc, or 81.5p, to 1548.5p after the warnings.

The group said in November that it would not raise prices in the face of increasing costs.

But yesterday ABF chief executive George Weston said: ‘We are completely intent on remaining the best value clothing retailer on the High Street and online and are ready to do whatever it takes to maintain that position.

‘But the inflationary costs we are wearing at the moment are very, very large.’

The bleak outlook came alongside an update for the six months to March 5 in which it said Primark’s sales and profits have climbed back to preCovid levels. Sales jumped 59pc to £3.5bn while Primark’s profits rose 863pc to £414m.

Hargreaves Lansdown analyst Susannah Streeter said its performance in the six month period was ‘resilient’, but it was not immune to mounting cost pressures.

She said: ‘Raising prices is a tricky manoeuvre to get right given that fans flock to Primark for high fashion at cheap prices and instead of piling clothes high in baskets they may be more cautious which could hit volumes.’

Weston said he expects some of Primark’s less well off customers to rein in their spending amid the cost of living crisis. But he said the retailer will pick up cash-strapped shoppers from higher priced rivals.

Primark, which has refused to move to selling online, this month launched a website for customers to see what it has in stock, which Weston said is ‘going down very well’.

He also said its recent partnership with high street baker Greggs was a success and it is planning further collaborations. Across ABF profits jumped 91pc to £706m in the six-month period, with sales rising by a quarter to £7.9bn.

But it is also facing high inflation across its food business.