British retailers are being too gloomy about the consumer outlook because the fundamentals of the UK economy are still sound, the finance chief of Primark owner Associated British Foods said on Thursday.
John Bason pointed out that UK employment is at historically high levels, while disposable income is still rising.
“Was there a degree of caution by the UK consumer (in the run-up to Christmas)? Possibly yes. But I find the comments about gloomy forecasts for the UK consumer surprising, I really do,” he told Reuters, after AB Foods reported solid festive trading for Primark, sending the group's shares higher.
“I think people are still spending but being just a little bit cautious about it,” Bason said.
Bounce In Consumer Spending
Major UK store groups, including Sainsbury's and Marks & Spencer, have said they are not expecting a bounce in consumer spending in 2020 after a subdued Christmas, partly blaming continuing Brexit uncertainty.
However, Bason said retailers with real relevance to the shopper can still prosper.
"I think that the Primark price point is such that we will continue to draw customers in," he said.
Primark, which trades from 376 stores but does not have an online offer, generates about half of AB Foods' revenue and profit.
The group, which also owns major sugar, grocery, agriculture and ingredients arms, kept its forecast for growth in earnings in its 2019-20 fiscal year as it reported revenue rose 4% year-on-year on a constant currency basis in the 16 weeks to 4 January.
New Store Openings
Primark sales rose 4.5% on the same basis, driven by new store openings. Analysts said like-for-like sales growth was flat.
In the UK, Primark's sales rose 4.0%, with a marginal decline in like-for-like sales but a gain in market share.
Primark also achieved like-for-like growth in the euro zone and in the United States, where it is looking to open more stores.
Shares in AB Foods, the majority of which are owned by the family of CEO George Weston, were up 2.7% at 1023 GMT, extending gains over the last year to 21% and valuing the group at about 21 billion pounds ($27 billion).
Bason said climate change and sustainability would become more important for the fashion industry in 2020.
"We're hearing it from our consumers," he said, pointing out that Primark was intensifying programmes to increase levels of organic and sustainable product in its stores.
The firm is increasing five-fold its sustainable cotton programme so that by 2022 it will have trained 160,000 farmers in India, Pakistan and China in more sustainable farming practices.