According to the owner, food inflation could be gone by Easter if there are no more shocks to global system.
George Weston, chief executive officer of Associated British Foods, which owns Primark, a budget clothing chain, stated: “Food prices inflation reached 20% last year, and I think by the end of 2024, it will be near zero.”
“I wouldn’t be surprised if, by the middle next year and perhaps even by Easter, the majority of the price inflation has gone,” he said, adding that the only major issues left were the conflicts in Gaza, Ukraine and elsewhere.
Weston reported a 25% increase in pre-tax profit to £1.3bn following sales that rose 15% to £19.75bn. While inflation was still present in certain commodities such as sugar, tomatoes, and onions, the price of key ingredients like cereals and edible oil had already dropped. This would have a positive impact on a range of other products, including poultry.
Weston’s remarks followed data from the industry that showed UK food prices had fallen to single digits, for the first since July 2022. This helped ease the crisis of cost-of-living.
According to Kantar, the rate of inflation in grocery prices has slowed down to 9.7% over the last four weeks.
Fraser McKevitt is the head of Kantar’s retail and consumer insights. He said that price drops were occurring only in a few major categories, including dried pasta, butter and milk.
McKevitt said that retailers continue to seek ways to soften the blow and slow the rate of price increases. The grocers have also increased their promotions. They all sold more through specials compared to last year, which has happened only once in the past 10 years.
Weston also said that clothing inflation was falling. The sales at established Primeark shops rose by 8.5% during the year ending 16 September, but profits dropped by 2.8%.
Weston stated that while labour costs are continuing to rise, they have been offset by the falling cost of transportation and key materials such as cotton.
He said that consumer demand was still uncertain but clothing sales have increased by more than 10% since the cold weather arrived in recent weeks.
Weston stated that the recent rises in pay have been ahead of inflation, suggesting that the “worst of the cost-of-living crisis may be behind many families”.
Weston stated that the recent strong sales had reduced fears of too much inventory, and therefore the pressure to discount in advance of Christmas.
Weston stated that “our Christmas collections are doing well.” Sales of Christmas jumpers have increased by 40% compared to the same time last year, as consumers spread their festive spending over multiple pay packets.
Primark will benefit from the addition of a new 1m sq ft selling area in the coming year. About a third is likely to be located in the US with the remainder in Europe, including Italy, Spain, and France.
The collapse of major UK rivals such as Debenhams, Topshop and others has helped the chain. These stores have left the high street to only sell online.
Weston stated that the value of goods stolen by Primark has doubled in the past year, a fact which was also highlighted by John Lewis .