Primark’s price freeze is risky inflation gambit, writes aimeedonnellan
AB Foods Chief Executive George Weston appears to be willing to sacrifice Primark’s near 10% operating margin to keep price-sensitive customers happy. Assume inflation shaves almost 3 percentage points off the retail unit’s operating margin next year, taking it down to 7%. To keep his operating profit stable at 756 million pounds, Weston will need revenue to rise by 40%.
That’s a tall order given his customers will have less money to spend on cheap shoes and dresses as they grapple with their own soaring energy and food bills. The 4% bump in AB Foods’ share price on Tuesday suggests investors reckon the plan may work. But if it fails, Primark may be hit with a double whammy of low sales and a battered margin. Japan baulks at U.S. car credits
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