Primark warns of ‘most challenging’ economy for many years

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9th November 2022

Bite-sized business news from the UK and beyond

Good morning Lord of the Rings author J.R.R. Tolkien has topped the 2022 list of dead celebrities raking in $500m. Companies that own bits of Tolkien’s intellectual property include Amazon, HarperCollins and Warner Brothers.

Today's stories

Primark warns of ‘most challenging’ economy for many years
America awaits election results

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Primark warns of ‘most challenging’ economy for many years

What happened?
Yesterday Primark reported sales of £7.7bn in the past year, a 43% jump on 2021 as UK stores benefited from the reopening of the high street post Covid lockdowns. However owner Associated British Foods warned that the cost of living crisis would challenge the retailer in the coming months.

Soaring inflation is a challenge for households and businesses alike
The chairman of the fashion and food group, Michael McLintock, said ABF had “encountered the most challenging economic conditions for many years with sharply rising and broadly based inflation,” plus “highly volatile” input costs and exchange rates. ABF said the rising costs of materials, energy and wages are likely to add £2bn to its costs base in the next year but that despite this it won’t increase prices for customers in the coming months.

Performance has varied by region
Primark has nearly 400 locations in 14 countries mostly in Europe. UK and US stores traded well in 2022 with the company trialling click-and-collect in the UK soon and almost doubling the number of US stores to 23 in the coming weeks.

But performance in Continental Europe remained below pre-pandemic levels, with consumer confidence “generally weaker.” Trading is so bad in Germany that the retailer is considering pulling out of the market after suffering £206m profit hit.

Looking ahead: Christmas is the most profitable time of year for retailers but this season will be particularly challenging amid the cost of living crisis. Yesterday a report released by Barclaycard, which captures half of all debit and credit card transactions, found that 50% of consumers were planning to spend less on presents, food and drink and socialising this Christmas.

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US
America awaits election results

What happened?
Yesterday US voters went to the polls to decide who will control the House of Representatives and the Senate – collectively known as Congress. But the outcome of some midterm races might not be known for days or weeks.

Catch-up: Every seat in the House of Representatives and a third of Senate seats are up for grabs. Both houses are currently (just about) controlled by the Democrats however polls show Republicans will likely snag a House majority, but the Senate is a toss-up.

If Republicans win control of the House, it will be difficult (if not impossible) for President Joe Biden to pass much of his administration’s legislative agenda.

In terms of foreign policy, some Republicans have voiced support for limiting aid to Ukraine if they take control of Congress, which could change the direction of the war.

For investors, a divided government could be good news. Stocks tend to rise as the typical post-midterm Congressional gridlock reduces the risk of major policy changes that could affect businesses' bottom lines.

The results could take a while thanks to the rise in postal voting, as well as close races where legal challenges are expected (and, in some cases, already underway).

Bottom line: These midterms are unlikely to produce big changes between the US and the UK but the election's outcome will shape the direction of the world’s most powerful government and its economy.

Stat of the day

The annual grocery bill in the UK has risen by £682 this year as food store inflation hits a new record

Interesting links from around the web

6 tips for reducing hiring and promotion bias
How to read 12 books at once
The 'growth mindset' all workers need to cultivate

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Primark warns of ‘most challenging’ economy for many years

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