Primark, the fast fashion chain compliments of UK-based Associated British Foods, recently announced a record drop in sales. Overall, this unexpected decline fuels worries over the retailer’s prospects in a challenging economic environment. The company’s overall like-for-like sales are down 3.1% on last year. This drop reflects a more generalized trend of consumer spending wariness throughout the UK.
Even with the good weather we would usually expect to see result in more people shopping, the numbers at Primark tell a different story. Shoppers are growing more reticent as well, primarily driven by the impact of higher prices and anxiety over the forthcoming government budget announcements. Randeep Somel, a fund manager at M&G Investments, noted, “the consumer is staying at home and seeing how the Budget goes at the end of this month.”
The drop in sales sets the stage for a trend of lower consumer confidence as customers continue to pinch pennies. Meanwhile here in the UK, inflation remains stubbornly high at 3.8%. This rate is far from the Bank of England’s target of 2%, further increasing the squeeze on households’ spending power. Primark faces fierce competition from shoppers increasingly looking for lower priced options, with the likes of Shein and Temu providing big challenges to Primark.
The Irish company Primark operates 475 stores in 18 countries. Yet the company has put themselves in a precarious position which could threaten strong performance all the way through 2026. Looking ahead, the company expects the same “subdued” retail environment will further weigh on sales. For his part, George Weston, Primark’s chief exec sounded a note of slightly cautious optimism for the year ahead. While he feels “confident” about 2026, that confidence is based on an unknown and potentially transformative consumer landscape.
Further, the increasing overhead expense that comes with physical locations weighs heavily on Primark’s challenges. Since April, firms have incurred massively growing costs as minimum wage and employer National Insurance rates jumped. This trend continues to erode traditional retailers’ ability to compete with the growing online behemoths as they’re faced with ever-increasing operating expenditures.
The retail sector has seen notable closures and administrations in recent months, with brands like Bodycare, Claire‘s, and Pizza Hut shuttering stores. Richard Hunter, head of markets at Interactive Investor, called Primark a “jewel in the crown” of the retail sector. He underscored the importance of “laser focus” to capitalise growth opportunities, particularly abroad where Primark is growing in popularity.