Spend slowdown hits Primark sales in Britain but Irish demand holds up

THE owner of discount fashion chain Penneys has reported sluggish sales in Britain although consumer demand is holding elsewhere in Europe, including Ireland.

As the recession bites deeper in Britain, Penneys — branded there as Primark — revealed a noticeable slowdown in trade. The company’s owners, Associated British Foods, said the chain’s half-year sales rose 3% — half the level achieved during its previous financial year.

AB Foods said while Primark traded well before Christmas, despite the bad weather, the mood had changed among British shoppers since January.

Shares fell nearly 6%, despite the firm saying Primark stores in the rest of Europe were doing well.

“The UK consumer is feeling a squeeze because of inflation and the VAT rise, and simply has less to spend,” ABF’s finance director John Bason said.

“Even for people who don’t feel they will lose their jobs, they will feel they are being squeezed. It won’t just be Primark, but we’ll see it for a number of retailers.”

The firm operates 214 stores mostly in Britain. It also trades in the Republic of Ireland, Spain, Germany, Portugal, the Netherlands and Belgium. Primark has been the group’s star performer in recent years as it has ridden the boom in demand for budget clothing on the high street.

But this news highlights the pressure on cut-price retailers since the VAT rise to 20% and as rising inflation takes its toll.

Last month the company made an out-of-court settlement over copying designs belonging to British textiles company Ashley Wilde Boulevard.

Ashley Wilde issued High Court proceedings in Dublin after Primark copied designs in its Penneys stores in Ireland in 2008. The company sought an injunction to restrain sale, damages and costs, in relation to its Boulevard design.

The out-of-court settlement for €100,000 was agreed on February 1 last. It followed a similar settlement with fashion retailer Superdry last year, and with Monsoon in 2004.