Investors in Primark’s owner, Associated British Foods (ABF), will be looking for signs that a recent round of price cuts has strengthened the retailer’s position in the value-fashion market when the group reports its fourth-quarter trading performance on Thursday.
Primark, ABF’s only retail business, generates the highest revenue of the group’s divisions. The company also operates major food, sugar and agriculture businesses.
Analysts will be watching closely for evidence of a late-summer improvement in Primark’s sales after the retailer announced in July that it would reduce prices on hundreds of fashion lines.
The move, which Primark said “reaffirms its place as the home of great-value fashion”, comes as UK household budgets remain under pressure from rising living costs.
The retailer has cut prices by up to 29% on hundreds of bestselling products, bringing selected lines into closer competition with online fast-fashion retailer Shein, whose cost advantage is facing increased regulatory scrutiny.
The permanent reductions are part of Primark’s Iconic Value initiative, which launched on 20 July across its 19 markets. The cuts apply to selected adult and childrenswear products being introduced in stores during the autumn/winter season, rather than across Primark’s entire range.
Primark is supporting the initiative with clearer in-store signage, simplified merchandising and a marketing campaign across stores, radio, social media and digital channels. It has also said it will continue investing in product quality, fit, durability and fabrics.
The pricing strategy comes as ABF prepares to separate Primark from its food operations and potentially list the retailer on the FTSE 100 as a standalone business by the end of 2027.
Meanwhile, the company warned in July that it expected to report lower profits for the current financial year than in the previous year. Higher gas costs, linked to the conflict in the Middle East, have put pressure on its sugar operations, with the group expecting the division to report an adjusted operating loss.
Russ Mould and Danni Hewson, analysts for AJ Bell, said: “After a challenging year, investors will be hoping for a sprinkling of good news driven by a boost in late summer clothing sales and the approval of the Hovis acquisition.
“Whether Primark’s recent UK price reductions have translated into positive like-for-like sales growth will be a key area of focus.”
They also described the planned Primark separation as a “monumental shift in strategy”, with investors likely to focus on whether the standalone business can secure a strong valuation or instead trades at a discount.
Aarin Chiekrie, equity analyst for Hargreaves Lansdown, said ABF’s next update is expected to show a “relatively underwhelming” financial performance.
“The key Primark business is forecast to deliver around 2% sales growth in the second half, despite a challenging retail environment, particularly for low-income consumers across the UK and Europe,” he said.
“This comes as continued like-for-like declines in its existing stores are expected to be offset by momentum in the US and growth from new store openings.”
Primark opened its 500th store last week, which Chief Executive Eoin Tonge described as an “incredible milestone”. The retailer continues to rely heavily on physical expansion as a driver of international growth.
“Getting to 500 demonstrates the enduring strength of our store-led model. We see significant opportunities ahead to grow our store footprint and bring Primark to even more customers around the world,” Tonge said.