SLOWING sales growth at budget fashion retailer Primark hit its parent company Associated British Foods’ shares yesterday.
The 204-strong chain, which makes a third of group profit, has grown strongly through the downturn as its cheap chic clothes prove popular with cash-strapped shoppers, but now spending cuts, extra costs and tax rises are clouding the outlook.
AB foods saw its shares fall around 2.7 per cent after the trading update, although they bounced back later to closed just 1.5 per cent lower at 1,070p.
The retailer, which is expanding into continental Europe, saw like-for-like sales growth from stores open at least a year slow to four per cent in the three months to mid-September.
AB Foods finance director John Bason said the slowdown compared to nearly ten per cent like-for-like sales growth in its previous fourth quarter which had been driven by very good weather in the summer of 2009. He warned that next year higher cotton prices and tax hikes were likely to dent sales at the company.
Bason warned: “We have to remain cautious for the outlook for the UK consumer.” AB Foods was more upbeat about its Twinings Ovaltine brands which were maintaining sales growth. “We expect the market to react negatively to slowing like-for-like sales growth at Primark and pressures developing for 2011,” said Sanford Bernstein’s Andrew Wood.