PRIMARK has warned that it will increase prices because of inflationary pressures exacerbated by Russia’s war on Ukraine.
The budget fashion chain said it will make “selective” rises in the range, having avoided most pressures from inflation until now because global exchange rates fell in its favour.
Associated British Foods, which owns Primark and Twinings and is also a major sugar producer, said the US dollar is strengthening and inflation is soaring, which will force the changes.
George Weston, ABF chief executive, said: “Inflationary pressures are such that we are unable to offset them all with cost savings, and so Primark will implement selective price increases across some of the autumn/winter stock.
“However, we are committed to ensuring our price leadership and everyday affordability, especially in this environment of greater economic uncertainty.”
It comes as businesses across the UK are having to make difficult decisions on pricing.
The cost of the energy firms need to operate has rocketed in recent months and the costs of the raw materials and staff they need are also rising amid fall-out from the Russian invasion of Ukraine, Brexit and the pandemic.
READ MORE: Primark sales 'ahead of expectations' despite supply chain disruption
It has meant some have opted to pass on these costs to customers, while many are wary as this is likely to discourage people from continuing to shop at their outlets.
John Bason, ABF finance director, said the soaring gas prices have particularly driven the company to plan price hikes later in the year.
“We had not originally expected the level of inflation to last as long as we are going to see,” he said.
“The situation in Ukraine means industrial gas prices have jumped six-fold so meant we have had to reassess pricing.”
However, despite price rises, Primark expects to see its sales increase because it is opening more stores, expanding its so-called selling space by ten per cent compared with the end of the 2019 financial year.
“As a consequence, total sales for Primark in the second half are anticipated to be ahead of the second half of the 2019 financial year, which was pre-Covid,” ABF said.
The company added that it has seen a fall in Twinings retail sales over the past six months compared with a year earlier when people were drinking tea at home. This was offset by the launch of new products in its Wellbeing range of teas.
AB Foods’ pre-tax profit rose 131% to £635 million in the six months to the start of March, as revenue rose by a quarter to £7.9 billion.
Mr Weston said: “This half-year sales and operating profit for the group returned to pre-Covid levels.
“Our people have responded well to the many challenges we faced.
“Our food businesses have once again proved their operational resilience and sugar had another strong period, building on its recent track record of recovery.
“Measures to mitigate higher costs in all our businesses have been taken and more are planned.
“Primark delivered a significant increase in sales and profit, with stores now open and trading largely free of restrictions.”
READ MORE: Glasgow firm helps deliver world's largest Greggs, in Primark
Sara Welford, director at Edison Group, said: “While the recovery is clearly under way, further inflationary pressures caused by the conflict in Ukraine are set to impact the group over coming months.
“Further prices increases in ABF’s food businesses are likely, in this context.
“Primark’s products are likely to remain in demand due to their affordability, though ABF will implement price increases for its autumn and winter stock in order to supplement cost-cutting measures.”
Keith Bowman, investment analyst at interactive investor, said: “The lack of a significant online presence over the course of the pandemic contrasts with that of clothing rival Next, whilst economic uncertainty and geopolitical tensions continue to warrant consideration.
“On the upside, both overall group sales and operating profit have returned to pre-Covid levels.”
Shares in ABF closed 5% down at 1,548.5p.
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