M&S and Primark feel the squeeze

THE tough trading conditions on the high street were underlined yesterday as retail giant Marks & Spencer and budget clothing chain Primark each revealed a dip in profits.

Marks & Spencer reported a profit of �320.5million for the six months to October 1, down 8% compared with last year’s first half and the company’s first reduction in earnings for two years.

Chief executive Marc Bolland said M&S had taken “decisive action” by offering promotions and better value to shoppers at a time when households finances were being squeezed, despite the company facing higher commodity costs, particularly in clothing.

Mr Bolland added that he remained cautious about the outlook but said the second half was going as expected so far, with the company “well set up” for the Christmas period.

M&S, which operates from 700 stores, has seen its profit margins squeezed as it tries to compete with rivals in both fashion and food.

Primark owner Associated British Foods said yesterday that the budget chain’s underlying profits fell 8% to �309m in the year to September 17 as it too partly absorbed some cost increases.

But ABF, which also makes Twinings tea, Silver Spoon sugar and Kingsmill bread, said group profits were up 1% to �920m as it benefited from higher margins in its sugar production arm, which includes British Sugar.

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The sugar division made an overall operating profit of �315m for the year, up 31% from �240m last time, but ABF said the profit of British Sugar had reflected the impact of the crop shortfall resulting from the frost damage sustained during the severe weather last winter.