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Primark hit by declining consumer demand

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Discount fashion retailer Primark recorded a three per cent year-on-year rise in like-for-like sales for the first three months of its financial year, a trading update revealed today.

Despite bad weather in December disrupting pre-Christmas trade, revenues are expected to have increased by 11 per cent in the first quarter, with full results for the period until March 5th due to be published in April.

Associated British Foods, owner of Primark, warned that trading has fallen off in the UK since January and rising international commodity prices are squeezing its margins.

Today’s statement stated: “Since the new year, the performance in all our operations in Continental Europe has been very encouraging but there has been a noticeable slowing down of UK consumer demand.

“Operating profit margin in the first half will be lower than last year reflecting the increase in VAT in the UK on 4 January 2011 and the impact on input costs arising from higher cotton prices which continue to rise. As previously highlighted, margins will remain under pressure in the second half.”

Ten new stores have been opened in the year-to-date including six in the UK, and in the second half of the year the group has another six outlets planned for across Europe.

These include three stores in the UK, at Kings Lynn, Scunthorpe and Ilford, which will take Primark’s total international selling space to 7.1 million sq ft.

“The development of the pipeline of new stores for Primark has been encouraging and capital expenditure both in the first half and the full year will be higher than last year,” the statement added.

Published on Monday 28 February by Editorial Assistant

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