Primark shines but it’s tough for parent

But parent company Associated British Foods is feeling the chill winds of recession in its grocery business, which includes brands such as Twinings, Ovaltine and Ryvita.

Departing chairman Martin Adamson said that the economic background to the last half year was "the most difficult for 50 years or more".

Chief executive George Weston, who is only 45, said he was "aware of the 1973 recession", "went up to university at the time of the Thatcher recession", and agreed that the present downturn was certainly the worst he has seen. He added: "It is really hard out there on the High Street. Consumers have a lot less money to spend and are trading down."

While that is good for Primark with its £2 tops and £10 dresses, it is not so good for ABF's massive grocery brands. Weston said: "That's where people trade down first. In some countries, like Australia, consumers have very definitely switched to own-label groceries.

"In others, like the UK, they stick with a brand like Twinings but move to the cheaper end rather than the premium products."

With the sugar business and Primark providing strong profit growth, the company is sticking with its forecast that this year will show little change in earnings on last year when it made profits of £613 million.

First-half profits were down 2% at £275 million on revenues up 18% at £4.37 billion. The first-half dividend rises 2% to 6.9p.

Primark had a bumper Christmas with same-store sales growth of 5%. Actual sales increased 18% to top £1 billion and profits rose 10% to £122 million.

The second half will see some pressure on Primark's margins because of the pound's weakeness against the dollar which is the usual currency used by clothing suppliers. That will be partly tempered by lower raw material and transport costs.