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The boss of Primark owner Associated British Foods predicted a boost in consumer confidence among the less affluent following Labour’s Budget but warned that the group will take a hit of “several tens of millions” owing to some of the changes.
Chief executive George Weston, whose grandfather set up the family’s conglomerate whose brands also include Ovaltine, Ryvita and Twinings tea, said it was “hard to look at this Budget and say that it was a good Budget for the high street”, citing changes to national insurance and the minimum wage as well as less reform on business rates than hoped.
Chancellor Rachel Reeves last week announced an increase in employers’ national insurance contributions by 1.2p to 15p and a reduction in the earnings threshold at which the tax kicked in, a move that will affect the retail, hospitality and leisure sectors.
Weston said there was “actually . . . more good news for the least affluent in the Budget than bad”, which he predicted would lead to an increase in consumer confidence and “a very good Christmas” for Primark, which has 451 stores in 17 markets.
His comments came as pre-tax profit at ABF, which has a market capitalisation of about £17bn, jumped 43 per cent to £1.9bn, on a 2 per cent rise in revenue to £20bn for the year to September 14.
Shares in ABF were up 4.3 per cent to £23.88 in morning trading on Tuesday.
Weston said value chain Primark achieved “good sales” and looking ahead the group was “well-positioned” despite weakness in its sugar business.
Primark increased sales 6 per cent to £9.4bn year on year with the high street retailer posting a 53 per cent uptick in operating profits to £1.1bn, as its collection with singer Rita Ora and other collaborations helped offset the impact of bad UK weather in the second half.
ABF, which also has an agricultural division in addition to Primark and its grocery, sugar and ingredients businesses, on Tuesday announced a further share buyback programme of £500mn and a special dividend of 27p per share.
Weston said the “changes to death duties” — following a shock cap on inheritance tax relief for agricultural assets in the Budget — was “just one more pressure on the UK farming community”.
He added: “I don’t think that government decision makers, for some while, have really thought about what you need to do to maintain a viable farming community, without which is very hard to maintain a good level of food security.”
Separately, shares in online fast-fashion retailer Asos fell almost 8 per cent after the company recorded lower sales and wider annual losses in the face of growing competition.
The company, which targets twentysomethings, recorded a loss before tax of £379mn for the year to September 1, compared with £297mn the previous year, while group revenue fell 18 per cent to £2.9bn.
Underlying profit, its preferred metric, came in at £80mn during the period — at the top end of previous expectations but down 44 per cent year on year as the company tried to reduce discounting which hurts profit margins. It is also under pressure due to increased competition from Shein and Temu.
Despite its performance, Asos said it expected its adjusted earnings to recover next year as its turnaround gains momentum.
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