Primark profits under pressure due to weak pound and high inflation

Primark has seen an increase in foot traffic as its store visits returned to pre-pandemic levels, resulting in a 19 percent sales boost.

However, despite this growth, the company's profits are under pressure due to a weak sterling and high inflation. Shares of Primark's parent company, AB Foods, fell 3.6 percent on Tuesday as shoppers prioritise essential household goods due to soaring inflation. As a result, items such as summer dresses priced at 18 pounds and tote bags for 16 pounds are taking a backseat in consumers' budgets.

The value retailers is feeling the impact of inflation, as rising commodity costs, wages, utilities, and purchasing dollars to trade with the US have prevented profits from increasing.

AB Foods CEO George Weston stated that weaker exchange rates are affecting the business: "In Primark our exchange rates we're buying clothes which now are weaker than this time last year," Mr Weston told Bloomberg. "That's still a drag."

The closure of several fashion chains on the UK high street, such as Arcadia Group, Debenhams, Oasis, Warehouse, Laura Ashley, and downsizing of others like New Look, has left a gap for value-driven customers. Primark has been successful in catering to this demand despite not operating an e-commerce platform.

The company has trialled a click-and-collect service in the North of England in 2022 and plans to expand it to other regions, including London.