Associated British Foods, owner of Primark and food businesses, warned this Thursday that the profit for its entire fiscal year will be worse than expected, due to the weakness of sales of its fashion chain in Europe and the slowdown in its food business, especially in the United States. The group’s shares fall 12.5% on the London Stock Exchange.
AB Foods, whose businesses range from clothing and accessories to agriculture, said that in a “difficult trading environment” it has had to increase markdowns on its stock levels, which will hurt the result for the financial year ending in September. The group has lowered its expectations and now expects both operating profit and earnings per share to be lower than the previous year. The company previously expected earnings growth.
Primark, a low-price fashion chain, had a particularly difficult Christmas season, with comparable sales falling 5.7% in Europe during the 16 weeks prior to January 3, its parent company explained. In the UK, Primark’s like-for-like sales rose a modest 1.7%. In total, Primark’s like-for-like sales were down 2.7%.
“Primark’s sales growth during this period was below our expectations and we now expect Primark’s sales growth in the first half of 2026 to be in the low single digits,” the company said in a statement. “In a difficult trading environment, we significantly increased markdowns to effectively manage inventory levels, which impacted profitability,” he added.
If Primark’s current sales trends continue into the second half, the company expects full-year adjusted operating profit margin to be approximately “at 10%, similar to the first half.”
Similarly, the food business, which includes brands such as Twinings tea, Ryvita toast and Kingsmill bread, also had mixed results. Low consumer spending in the US hurt its sales, and demand for oils and baked goods was weak. The company said its grocery and ingredients divisions will now generate lower profits than last year.
“We expect difficult trading conditions to continue in the short term,” said AB Foods CEO George Weston, adding that the company has plans in place to improve profitability in Europe. “We have a wide range of initiatives planned and underway in the coming months, which we hope will drive improvements in sales and profitability, especially in Europe,” he said. Continental Europe represents 49% of Primark’s sales, the United Kingdom and Ireland represent 45% and the United States 6%.
AB Foods’ profit warning highlights growing pressure on retail chains and packaged food makers, as customers in both Europe and the US adjust their spending in the face of persistent cost-of-living pressures.
A few months ago, from the rest of its business, a measure that some analysts do not see as sufficient. “Primark has not yet implemented digital operations of Click & collect in continental Europe, so its presence is limited to physical retail, where competition is increasing,” say Bloomberg Intelligence analysts. “The possibility of Primark achieving a premium valuation by separating the fashion and food units is lower until it demonstrates that it can grow rapidly in all markets with a stable margin,” they add.
The separation of the businesses “could take up to two years to complete,” Weston said in November, adding that in any case “it is not a done deal.”
