Primark in cotton price rise warning

A HIKE in cotton prices is set to tear a strip out of margins at Primark, the fast-growing budget clothing retailer.

News of the squeeze came as parent company Associated British Foods reported double-digit sales growth at Primark over the key festive trading period.

The 13 per cent increase in the 16 weeks to 8 January was in line with management expectations and helped by opening ten stores in the period.

Its operating margin increased but is set to come under pressure as the chain absorbs some of the cost of the soaring price of cotton and the rise in VAT as part of its commitment to compete with high street rivals.

AB Foods reported that its Kingsmill bread division grew its market share, helping overall sales increase 7 per cent in the period. It also warned the recent weather conditions had impaired the quality of its sugar beet crop in the UK, which could reduce profits at its sugar division.

l Profits at fashion and homewares firm Laura Ashley are set to be "significantly higher" than hopes after it shrugged off the impact of the severe weather. It marks the second upgrade in the space of a month.