What does Primark’s less than golden quarter mean for the rest of UK fashion?

Primark parent company Associated British Foods told the City earlier today that while the fashion retailer’s revenues grew just 2% for the 16 weeks to January 4, 2025, sales in the brand’s core UK and Ireland markets suffered – with a 4% decline in total sales and a 6% slump in like for likes.

Given that the UK and Ireland represent 45% of the giant’s total sales, this downward turn represents a concerning turn of events.

The fashion retailer noted that during the period the overall clothing retail market in the UK declined, as was also noted by Marks & Spencer and Next in their recent Christmas trading updates. 

If the Primark powerhouse is struggling, what does that mean for the rest of fashion retail? And if even its cash conscious customers are being cautious with their spend, how will it affect the retailer moving forwards?

‘If Primark is suffering, UK retail is in trouble’

Despite pledging to be “confident in the proposition” moving forward, it would be fair to say that Primark’s sales woes, particularly across its key womenswear category, are a cause for concern.

Blaming “cautious consumer sentiment” and a “lack of seasonal spending”, Primark grappled with weak performance in October and November as it struggled to shift clothing suitable for cold weather, as well as the standout seasonal pieces in the run up to Christmas.

AJ Bell investment director Russ Mould said that if shoppers are cautious even when it comes to buying bargain staples at Primark, times might be tougher for shoppers than many realise.

“If Primark is struggling, you know the UK retail sector is in trouble,” he said. “Shoppers remain cautious about spending and reticence over popping a few cheap tops or jumpers in their basket at Primark suggests times are very hard indeed.”

Shore Capital director Clive Black adds that not only have volatile trading conditions impacted Primark and its fellow fashion players but also the entrance of the Labour government and a “tough Budget” for the sector.

“A lot of businesses are talking about reviewing their labour process. Simon Wolfson at Next spoke about the fact that when the employment bill comes in they won’t be employing the same number of young people and part-time staff. George Weston at ABF said that today as well, so that backdrop is just more cautious generally,” he said.

“I think following the updates from Christmas there is a very clear message to the government that they need to listen and change things quickly otherwise they are going to see an economy that’s going to slow down at a greater pace with a potentially very major increase in unemployment.”

A battle at the bottom

With ‘new in’ hauls proving a hit on social media for shoppers eager to prepare for their next Primark splurge, the fashion retailer has always benefited from customers buying high volumes and enjoying a classic bit of retail therapy.

But are today’s sliding sales figures pointing towards a change in consumer shopping behaviour? 

Mould says that if shoppers being more selective is a behaviour that is here to stay, this could prove a bigger problem for Primark moving forward, as it is built on a business model that shifts high volumes of goods. 

Having been seen as a value fashion leader for the majority of its history, Global Data apparel analyst Alice Price points out that the competition within the value space has also ramped up of late and could be posing a new challenge for Primark.

She said: “Where Primark once reaped the benefits of shoppers trading down amid inflationary challenges, many are now switching to retailers with better value for money perceptions.”

Having experienced “good growth” across central and eastern Europe and the US during the period with revenue growth of 22% and 17% respectively, Price adds that this is the area of opportunity Primark need to take advantage of to drive performance.

By rolling out its click-and-collect service, which has proved a hit in the UK, in some of its European and US markets it would be able to rival discount favourites such as Kik, Pepco and Walmart to continue driving growth outside of the UK and allow it to continue dominating the value fashion space.

Online vs stores

In a change of narrative for fashion retail, online thrived amid the bad weather towards the end of last year, as shoppers opted to order from the warmth of their homes rather than venture out to the shops.

While Primark has an increasingly popular click-and-collect option for customers, it’s lack of online offering may have proven to be a hindrance last Christmas. 

Global Data’s Price says that Primark’s focus on bricks-and-mortar – something that has long been been a historical strength and unique selling point for the retailer – might become a hindrance to the fashion giant in the future.

“Its performance has also been impacted by the continued outperformance of the online channel, while instore footfall would have been dampened by stormy weather,” she said.

“Though Primark’s click-and-collect service was rolled out further to 113 stores during the period and is said to be performing well, the retailer is still missing out from its lack of home delivery service, and with online continuing to outperform within the UK apparel market for the next few years, this may become a long-term hindrance.”

The other question that remains unanswered is if the sales slip reported today goes beyond the current market conditions and unpredictable weather or if this is the beginning of a more dramatic shift in shopping habits moving forward.

Mould questions if changing shopping habits are likely to lean away from Primark’s strengths or if it can remain resilient enough to weather the storm.

“The issue now is whether the slowdown at Primark is indeed cyclical, due to a soggy economy, weak consumer confidence and unhelpful weather, or structural, thanks to direct competition from Temu, Shein and others,” he says.

“Or [is it] a change in taste among clothing buyers, some of whom seem to be leaning toward a more curated model based on Vinted, Depop and other sellers of pre-loved gear, that still looks stylish but cuts down on what some see as excessive consumption.”’