Associated British Foods (ABF), the diversified FTSE 100 conglomerate and owner of budget fashion retailer Primark, has issued a profit warning, sending its shares down by more than 12%. The warning follows a challenging trading period for Primark in mainland Europe and the United States, coupled with a mixed performance across ABF’s food division. The company now anticipates group adjusted profit and earnings per share to fall below last year’s figures.
For the 16 weeks ending 3 January 2026, Primark’s sales growth did not meet previous expectations. While the UK market demonstrated “encouraging” sales growth of approximately 3%, with like-for-like sales increasing by around 1.7% in a “difficult clothing market, particularly over Christmas”, this positive trend was overshadowed by weakness elsewhere. The company noted that these UK improvements, driven by investments to enhance its customer value proposition, product offering, price perception, and digital engagement including Click & Collect, helped Primark gain market share.
In stark contrast, Primark experienced a 5.7% decline in like-for-like sales across continental Europe during the period. ABF attributed this to “weak” consumer confidence and the nascent stage of initiatives designed to improve performance in these regions. The US retail market also proved “volatile”, impacting both consumer sentiment and footfall for the brand.
Consequently, ABF projects Primark’s sales growth for the first half of 2026 to be in the low single digits. The need to “significantly increased markdowns to manage inventory levels effectively” further impacted profitability during the difficult trading environment.
ABF’s food businesses also faced “mixed” fortunes over the period. The impact of consumer weakness on its US cooking oils and bakery ingredients segments was “more acute than anticipated,” contributing to the downgraded profit outlook.
George Weston, Chief Executive of Associated British Foods, commented on the performance:
“Primark has had a challenging start to the financial year, with a mixed performance. In the UK, focused actions and investments to strengthen our customer proposition have driven improved trading and market share gains, while trading has remained weak in continental Europe.”
“In a challenging consumer environment, our focus is on factors within our control, including initiatives now under way in Europe aimed at improving performance. We are also making good progress to deliver Primark’s medium and longer-term growth opportunities.”
Addressing the broader group performance, Mr Weston stated:
“Our food businesses experienced mixed trading in the period, particularly in the US where consumer demand in certain categories has continued to weaken. While we expect the tough trading conditions to continue in the short term, we remain confident in the overall prospects for the group.”
Dan Coatsworth, Head of Markets at AJ Bell, offered his perspective:
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“Sadly, Primark’s mainland European stores had a terrible time, with a large decline in sales. Even the US stores were volatile. When all the different territories are factored in, Primark has disappointed big time and forced management to slash prices to rock bottom levels to clear inventories and stop its stores from gathering dust.”
He further noted the broader implications for the parent company: “It puts parent company Associated British Foods in a difficult situation. Normally it would have other parts of its group to pick up the slack, but the food arm hasn’t been doing that well. That’s led to a nasty profit warning for the group.”
Shares in ABF closed down by 12.32%, or 265p, at 1,886p.
