Primark sales slump as tax fears in the UK and political turmoil in Europe take their toll

The owner of Primark has warned of weak sales as tax fears in the UK and political turmoil in Europe take their toll.

George Weston, chief executive of Primark’s parent company Associated British Foods (ABF), has flagged ‘very negative consumer sentiment’.

And he said he was worried about the consequences of the Budget on November 26.

By contrast, Zara owner Inditex reported a strong start to autumn and said its ranges had been ‘well received by customers’. 

ABF, which also owns household brands including Twinings and Ovaltine, saw shares plunge 13.2 per cent. Inditex, however, rose 6.5 per cent.

Weston said shoppers across ‘large swathes of continental Europe’ have ‘very squeezed’ disposable income.

Political uncertainty: Primark-owner ABF, which also owns household brands including Twinings and Ovaltine, saw shares plunge 13.2%

Political turmoil in France and Spain has also hit consumer confidence, he added. ‘The consumer is in a very difficult place, and there’s an overlay of a sort of nervousness about the future.’

In the UK, Weston said the Budget was casting a shadow. ‘I do fear the unemployment rate is beginning to pick up, and that won’t do consumer confidence any good,’ he said.

He added that he was concerned by Labour’s proposed reforms to business rates, echoing fears that they will result in large shops closing.

‘We anchor high streets up and down this country. If you want to support the High Street, it makes no sense to me that you would penalise the people that do the biggest part of driving footfall to those high streets.’

Chancellor Rachel Reeves is facing pressure over her proposed rates reforms, which are theoretically designed to level the playing field between bricks-and-mortar businesses and online rivals.

She has angered large retailers by increasing taxes for larger premises, with businesses arguing the changes will also hit ‘anchor’ stores that draw in shoppers to other businesses.

Retailers fear 4,000 shops could be forced to pay higher rates. There are also worries that the Budget’s timing will weigh on already dire consumer spending in the run-up to Christmas.

ABF warned of ‘consumer caution’ after it said Primark’s like-for-like sales are expected to have dipped 2 per cent in the six months to September 13.

In the UK and Ireland, sales are expected to have grown 1 per cent, aided by warm weather and booming womenswear ranges. Products flying off the shelves this month include a pair of £22 palazzo jeans.

Inditex, the world’s largest fashion retailer – which also owns the Pull & Bear and Bershka brands – said sales rose 9 per cent between August 1 and September 8, compared to the same period last year. 

They grew by 1.6 per cent to £15.9billion in the six months to July 31.

Inditex boss Oscar Garcia Maceiras said: ‘We have again achieved a solid performance, with satisfactory sales in a complex market environment, keeping strong levels of profitability.’

Russ Mould, investment director at AJ Bell, said: ‘Inditex is navigating a challenging path. Its products are more expensive, which means the goods must sparkle to convince cautious shoppers to part with cash.

‘The difference between Inditex and Primark is that the former is more upbeat about current trading, explaining why its shares jumped.’

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