DAVY VIEW

Persistent and elevated cost inflation will weigh on margin delivery through FY22 and FY23 as the food businesses chase recovery and Primark prioritises price leadership. Forecasting error remains high, with margin recovery contingent on the normalisation of externalities. An uncertain market response may prompt a lower-for-longer margin cadence. In the current environment, demand for value-led offerings should outperform. With underlying margin headwinds, density recovery and estate expansion take on greater importance to the economic model. Prudent leverage continues to offer scope for more progressive capital returns.