Two leading high street names warned today of the repercussions of the plunge in the value of the pound since the referendum vote signalled the UK’s planned departure from the European Union.
Billionaire Mike Ashley’s Sports Direct said that it will be “impacted significantly”, adding that a weakening economy post-Brexit will hit consumer confidence, while fashion retailer Primark’s owner ABF said the depressed pound would hit profit margins at its core UK arm.
Sports Direct’s warning came as the sportswear group reported a 0.5 per cent dip in annual core earnings to £381.4 million, while overall sales were up 2.5 per cent at £2.9 billion.
It said that current political uncertainty was likely to act as a continuing drag on consumer confidence in the short to medium term, adding: “When combined with the structural difficulties for UK retailers, including high street footfall, and our exposure to the weakness of the pound against the US dollar, these factors make the outlook for full year 2017 somewhat uncertain and therefore hard to predict.”
ABF, revealing that its subsididary Primark’s sales rose 7 per cent in the 40 weeks to 18 June, said: “Sterling has weakened significantly since the referendum vote. In our next financial year, these rates would have both positive and negative effects on profit.
“There would be an adverse transactional effect on the profit margin on Primark’s UK sales, currently half of its turnover, a favourable transactional effect on British Sugar’s margins and a translation benefit on group profits earned outside the UK, which last year were some 50 per cent of the total.”
ABF said it was to press ahead with expansion of Primark, with earmarked openings in Europe and the US.