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Associated British Foods contends with margin pressures

by LLB Reporter
28th Feb 22 12:33 pm

Inflation has taken a bite out of Associated British Foods’ margins for its various food businesses. Like many businesses, there is a lag between it stomaching higher input costs and passing that on to the customer.

While a plan is in place to put margins back where they were, investors continue to have a very short-term view and Associated British Foods’ share price takes a knock on the news.

“Primark has proved to be resilient as ever, with higher input costs being offset by lower store operating costs and favourable exchange rates,” said AJ Bell’s Russ Mould.

“Clever product innovation such as having limited edition Greggs-branded clothes, hats and footwear has helped to keep people coming to its stores. You only need to look at a Primark queue in a typical store to know that demand remains strong, and customers rarely buy just one item per visit.

“All eyes will be on Primark’s new website which launches by the end of March. While falling short of letting someone order online and have items delivered to their home, it will show product availability by store.

“That could be a blessing and a curse. If someone is after a specific item and sees it available, they could rush to buy it. Buy if it is out of stock, Primark effectively misses out on someone going to a store to look, and then potentially buying something else if their first choice wasn’t on the shelf.”

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