Primark slowdown stokes retailers' fears

Britain's High Street could be heading for one of its toughest years for decades, City analysts predicted today, after Primark reported a marked slowdown in trade.

With inflation jumping, pay packets stagnant and Government cuts about to bite, consumers are spending with caution, if at all.

That the malaise is affecting even fast-fashion house Primark, a budget chain that prospered during the recession, had retail watchers warming up the red pens to slash profit forecasts across the sector.

Primark's parent, Associated British Foods, said the post-Christmas performance in Europe has been "very encouraging, but there has been a noticeable slowing down of UK consumer demand".

ABF says like-for-like sales are still growing at a relatively healthy 3%, but that's a long way shy of recent levels of progress.

Darren Shirley at Shore Capital wondered aloud what this means for the rest of the High Street.
"Demand seems to have been especially poor in February, and... the likelihood of downgrades in the broader retail space must be growing," he said. "From opposite ends of the retail spectrum, Primark and John Lewis are recording tough trade and they are both best in class."

The boom in commodity prices - not all bad news for ABF which also produces sugar and tea - is a growing source of trouble for retailers without such a hedge.

The soaring cost of cotton means most clothes will be dearer.

Shore Capital thinks Primark profits will take a hit of up to £15 million in the first half if present trading conditions continue.

ABF finance director John Bason said: "UK consumers were quite robust going up to Christmas; since the New Year less so. The consumer is being squeezed at the moment."

Shares in nearly all retailers lost ground today in the wake of the Primark statement.