PRIMARK-OWNER Associated British Foods has warned that price discounting in Britain will hit margins at its discount fashion chain more than expected. It is however still maintaining its forecast for flat group earnings for the full year.

The food and retail group, which trades in Ireland as Penneys, said summer sales along the British high street had come earlier and with bigger price cuts than previously, which would slice further into Primark’s margins, already expected to be lower due to higher cotton costs.

“The summer sales have been brought earlier and deeper,” AB Foods finance director John Bason said after the company issued a full-year trading update. “The UK high street is a tough place with a real squeeze on disposable income and people are being careful on what they spend.”

AB Foods shares were off 2.2 per cent at £10.46 in early morning trade in a London market down 2 per cent.

Mr Bason said Primark trading had held up well with overall sales up 13 per cent for its year to mid-September and like-for-like sales were up 3 per cent after a similar first-half rise.

The company, which markets Silver Spoon sugar, Mazola vegetable oil, Ovaltine drinks and Twining tea, said higher-than-expected sugar profits benefiting from gains in Spain, Africa and China would offset the Primark margin fall to see overall full-year group earnings similar to the previous year.

The group was giving a trading update towards the end of its 52-week financial year to September 17th and will report full year results on November 8th.

“As previously indicated, adjusted earnings for the full year are expected to be similar to last year’s very strong results which benefited from 53 weeks trading,” the group said in its trading update. – (Reuters)