Associated British Foods Plc, the owner of Primark clothes stores, has cut its earnings forecasts, saying that higher costs had forced it to reduce retail margins, writes Laura Slattery.

Primark, which trades as Penneys in Ireland, said the impact of higher input costs, especially cotton, had contributed to lower operating profit margins in the six months to March 5th. The company was also affected by a VAT increase in the UK.

AB Foods’ share price fell 6.6 per cent in trading on the London market. Adjusted earnings per share, which excludes some items, will be similar to last year, AB Foods said.