AB Foods warned yesterday that the spiralling price of wheat, cotton, and other commodities means that shoppers could face price hikes on basic shopping basket goods.
The firm, which has brands including twinings Tea, Kingsmill bread and Silver Spoon sugar, said customers had already seen some rises and more were looming. Cost increases have also hit corn, spices and oil, while rice is one of the few commodities to remain stable.
AB Foods, which also owns high street retailer Primark, has said that despite steep cotton price increases it will ensure that the budget retailer remains cheaper than rivals.
But it said of its grocery division in a statement yesterday: “Delays in securing these increases will adversely affect margins and the impact of continued rises in commodity costs will need to be carefully managed.”
AB Foods also said the effect of severe British weather on sugar beet still to be processed will cut into its sugar profits this year, with analysts putting the likely hit as high as £20m.
However, its 214-strong Primark discount fashion chain shrugged off the snow and cold weather to show overall like-for-like sales up 12 per cent over Christmas for the 16-week period to 8 January. Regardless, AB Foods admitted that profits will come under pressure from the rise in VAT.
Meanwhile, the Kingsmill bread division grew its market share, helping overall sales rise seven per cent in the period. Grocery sales rose by nine per cent with beverages performing particularly well.
Shore Capital analyst Darren Shirley said: “The stock may pause for breath for a period, however in the medium to long term we believe the strong cash flows, robust growth, international breadth and balanced portfolio remain an attractive investment proposition.”