Sales at Primark have fallen for the first time since the pandemic lockdowns, as the company said its low-income shoppers had been hit by economic worries.
Associated British Foods (ABF), which owns the fashion retailer, said sales at Primark’s established UK stores fell 6% in the final three months of the year.
Eoin Tonge, the finance director of ABF, said lower income shoppers had cut back on spending as they were “feeling more challenged” amid “uncertainty and actual unemployment” as companies looked to cut working hours for those on low pay.
He said Primark had lost market share to some other retailers, such as Marks & Spencer and Next, because it was more reliant on less well-off households who were feeling the pinch. “Some of our consumers are struggling,” Tonge said.
Apart from concerns about fewer working hours or potential job losses, lower income households were also less likely to buy clothing during the mild autumn when warm gear was not really necessary, he added.
Primark’s figures reflected difficult trading for clothing retailers in the run-up to Christmas amid poor consumer sentiment. Retailers fear the downbeat mood, driven by concerns over the economy and job prospects, will depress sales in 2025.
Tonge said that atmosphere would be a bigger cost to the business than the “tens of millions” more it expected to pay in employers’ national insurance costs from April, an issue that retailers have warned will add £7bn a year to their costs.
Sales of seasonal womenswear, such as coats, knitwear and boots, were particularly affected. A strong Christmas failed to offset poor trading during October and November when the weather was mild for the time of year.
The retailer, which has a relatively small digital operation only allowing internet orders to be collected from some stores, admitted it also lost market share to rivals with a bigger online presence. Some competitors increased sales over the period, as shoppers shifted to home deliveries during stormy weather in December.
ABF said total sales over the final quarter had risen 2%, behind forecasts, and it expected annual sales to rise by no more than 3%. It had previously predicted they would rise by about 5%.
Tonge said it was not clear whether a rise in the legal minimum wage in April would help offset fears about cuts to part-time working hours or potential job cuts.
He called on the government to “redouble effort on growth and positivity” and to think again about plans to increase business rates for larger stores. He said the change would hit companies such as Primark, which were “trying their best to drive redevelopment of the high streets”.
Sales in mainland Europe and the US are expected to continue to perform better than those in the UK and Ireland. In the final quarter, sales rose 9% in Spain and Portugal, 5% in France and Italy, and 17% in the US as Primark opened new stores.
ABF’s grocery business also struggled in the UK as sales in its bakery arm, which includes the Kingsmill and Allinson’s bread brands, fell back after Tesco removed a number of the group’s products. Overall grocery sales for the group rose by just 1%, led by strong sales of Twinings and Ovaltine, particularly overseas.
The ABF share price fell slightly but James Grzinic, an analyst at Jefferies, said there was some relief that there was no cut in profit margins at Primark despite hefty discounting in the UK clothing market, which makes up 45% of the chain’s sales.
ABF said it expected to hold profit margins as “good cost management offsets inflation”.
“Despite the market conditions in the UK and Ireland, we remain confident in the Primark proposition and continue to focus on initiatives across product, digital and brand to drive underlying growth,” the company said.
