Primark's Christmas alarm bells over 'challenging' November sales
7 December 2018, 08:14 | Updated: 7 December 2018, 16:49
The owner of Primark - one of the high street's best performers since the financial crisis - has warned of "challenging" sales at the discount fashion chain in the run-up to Christmas.
Associated British Foods (ABF) issued the update ahead of its AGM and a month after its last financial results reported a hit to demand from unseasonably warm weather.
ABF said on Friday that while comparable sales were up fractionally in September and October, lower footfall combined with warm temperatures to knock sales.
It marked chilly news for the UK's troubled high streets at the most important time of the retail calendar following a year that has seen Toys R Us and Maplin go to the wall.
Other chains, such as House of Fraser, have been rescued from collapse with its new owner, Mike Ashley, using an exclusive interview with Sky News this week to demand more help for the high street.
Scores of other well-known names have been closing stores and seeking cheaper rent deals with landlords.
The sector has endured a storm on two fronts - weaker consumer spending in the run-up to Brexit and a surge in costs from minimum wage rules and business rates to higher rents.
ABF stopped short of issuing any kind of profit alert but shares were down 2.5% in early deals - putting some pressure on retail shares as the FTSE 100 recovered from its worst fall in percentage terms since the Brexit vote.
They were over 4.5% down by the close.
The company's statement said chairman Michael McLintock would tell the shareholder meeting: "At this early stage in our new financial year, sales and profit for the first 8 weeks of trading for the group were in line with expectations.
"However, during November Primark trading was challenging, in a tough retail market, but with careful inventory management and improved margins, our expectation for the increase in Primark profit is unchanged.
"I reiterate the Group outlook statement for the current financial year that was included in the annual report."
The company confirmed it was to open a new store in Belfast on Saturday following the fire which gutted its Bank Buildings home in August.
Its statement added that Primark's selling space expansion would continue despite the squeeze on sales and Brexit uncertainty.
"Following the opening of a store in Belfast tomorrow, we will be trading from 364 stores and a total selling space of 15.1m sq ft."
Neil Wilson, chief market analyst at Markets.com, believed Primark's warning was a worry.
He wrote: "We know it's tough out there and share prices across the piece reflect that already to a large degree.
"But Primark has done better than most and the fact that it too is facing severe headwinds is a concern for the sector as a whole.
"ABF shares shipped 2.5% on this and we are seeing some read across to other retail stocks.
"If Primark is struggling, what chance does the rest of the high street have? Some of the weaker high street stocks are sliding even as the broader market climbs.
"M&S; shares are down 0.5% on the read across from this - we know that Marks and Spencer is facing a bit of make or break Christmas.
"Debenhams, another one on the ropes and needing a big uplift from this holiday season, has dropped 2%."
(c) Sky News 2018: Primark's Christmas alarm bells over 'challenging' November sales