The discount fashion chain store that became a success story on high street has had its bubble burst.

Primark, whose expansion drive has placed them on many British shopping lists, has reported slow summer sales as consumer confidence took a battering.

Shares in Associated British Foods (AB Foods), the firm’s parent group, fell 1.5 per cent as the news became known of marked slowdown in sales growth.

While full-year budgets and profit earnings for the retailer are still on track to beat forecasts, Primark warned that tough times lie ahead as increased living costs and the impending VAT changes would spell trouble times in 2011. The fashion industry is now bracing itself for the next round of sales updates from fellow high street staples Next and Debenhams, due out next week, with analysts anticipating that similar grim outlooks will be commonplace.

The Primark chain, which consists of 204 retail outlets, makes up one-third of the group’s profit at AB Foods. Its like-for-like sales slowed in the three months till mid-September by around 4 per cent, meaning the year now sits at an increase of 6 per cent following the 8 per cent first half performance.

John Bason, AB Foods finance director, said that the previous fourth quarter sales, made longer by an Indian summer in 2009, meant that the last quarter showed a decline of closer to ten per cent. Bason added that Primark would remain cautious in the way it handled the outlook and the UK consumer.

The slow pace of economic recovery has not appeared to have slowed down spending on fashion.

That is the verdict according to the latest just-style Apparel Industry in 2010 report, which found that fast and value fashion operators will be the most likely businesses to succeed in 2010, leading the way in profit forecasting.

The report  claimed that retailers who offer fashion collections at low prices are in the best position to take advantage of the current consumer climate in the UK, with organisations such as Primark set to  boom thanks to their strategy  of high volumes at low prices.

 The just-style survey also found that in the value fashion sector, where Primark is joined by the likes of New Look, the growth rate was at a high 59 per cent, while respondents also suggested that chains such as Mango and Zara, which are classified as fast fashion, could also expect to see growth of 56 per cent.

However, it was traditional favourite H&M that was seen as being the retailer who will see the greatest levels of growth in the remainder of 2010. 26.5 per cent of those polled said they expected H&M to top growth tables, while Zara was second with 20.6 per cent of the vote. In the five company query, Primark was third on 14.4 per cent, ahead of New Look on 7.5 per cent and Mango at 6.6 per cent.

Primark, a low-budget fashion retailer, announced that it had seen increasing amounts of growth in the chain over the past 16 weeks up until January 2. Like-for-like sales for the fashion chain were up 7 percent over the last period, according to analysts.

Panmure Gordon analysts have said that Primark’s like-for-like numbers came out at the beginning of this year as some of the most impressive in the industry for the Christmas holiday season. Primark also reported that their overseas sales where up in addition to reporting large numbers for their UK stores.

The fashion chain’s European stores include 14 in Spain, two in Germany, two in Portugal, one in Holland, and one in Belgium. Sales in Spain were some of the highest for the company reaching into the double digits in percentages during the Christmas holidays.

John Bason, finance director for the parent company of Primark, Associated British Foods, said that in terms of Spain’s economy, the company’s final sales for the holiday period were phenomenal. The high figures are causing the company to push forward their new store opening programme which will begin in the UK this year.

Mr Bason added that the firm would also look into expansion into other countries as their success continues to mount. Revenues for Associated British Foods in other aspects also increased this year despite the harsh recession hitting the economy.