Challenging trading conditions hit UK’s third-largest clothing retailer in November
The Primark update added to evidence of a slowdown in British consumer spending in the buildup to Brexit. Photograph: Michele Tantussi/Reuters
Primark sent a shiver through the high street on Friday as it warned of “challenging” trading conditions, with Brexit jitters threatening the busiest shopping weeks of the year.
Sales at the UK’s third-largest clothing retailer, behind Next and the market leader M&S, have been bucking the high street gloom but Primark warned of “challenging” trading during November as fewer shoppers visited its stores.
The independent retail analyst Nick Bubb said the update would “strike fear” into fashion retailers’ hearts because Primark is viewed as one of the sector’s more resilient names.
John Bason, the finance director of Primark’s parent Associated British Foods (ABF), cautioned: “This isn’t a call on Christmas – we’ve got three big weekends coming up now before Christmas. But I think it is a call on quite mild weather during November and I think it’s affected footfall.”
Bason told Reuters that while sales at stores open more than one year were “just positive” in September and October, they had turned negative in November. He declined to give precise numbers. ABF shares were the biggest fallers in the FTSE 100, down more than 4%, despite the index’s rebound from its worst session since the day after the EU referendum in June 2016.
The Primark update added to evidence of a slowdown in British consumer spending in the run-up to Brexit. The troubled Ted Baker business reported disappointing figures on Thursday while John Lewis said sales had slumped in the wake of record takings during the week of Black Friday.
November’s subdued figures reflect the cautious mood on the high street. Consumer confidence dropped by three percentage points to -13%, the lowest level this year, according to the long-running survey by research firm GfK. Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk
Overall consumer spending rose 3.3% year on year in November, the lowest growth since March, despite the boost from Black Friday, according to Barclaycard. Clothing spending contracted by 2.9%, the biggest fall since October 2017, while spending on household appliances was down by 14%.
Famed for its “cheap chic”, Primark said that careful stock management, coupled with improved clothing profit margins, meant the retailer was still on track for bigger profits in the coming year. “It’s a blip that from a profit perspective we can manage,” Bason said.
Primark will open more than 1m sq ft of new selling space in the coming year, with stores planned in mainland Europe as well as in the UK, including its biggest to date, a 160,000 sq ft branch in Birmingham Pavilions.