Profit margins are expected to be lower for Primark in the next financial year, said its owner Associated British Foods PLC (LSE:ABF), as it battles with the cost-of-living crisis.
In a year-end trading statement, the FTSE 100 company said it expects its Primark division to suffer next year from “declining disposable income for consumers as a consequence of inflation.”
Market volatility, cost inflation, and much higher energy costs will all also adversely impact sales over the next 12 months.
For the next year, operating profit and adjusted earnings per share are expected to be lower than this year for the group as a whole, even though the grocery division's revenues and profits are seen as benefitting from inflationary price increases.
But for the year-end 17 September 2022, Primark is expected to generate some £7.7bn in sales, 40% ahead of last year at constant currency, reflecting the ending of COVID and a return to normal customer behaviour.
Operating profit in ABF’s food business is in line with expectations, reflecting price actions and volume increases, according to a statement.
As a result, the company kept its financial outlook for the current year unchanged, where it expects to deliver a “significant increase” in adjusted operating profit and adjusted earnings per share.
Net debt including lease liabilities is expected to be £1.7bn, with the board considering whether to return cash to shareholders in November.
ABF will release its full-year results on 8 November.