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Primark owner Associated British Foods has warned weak clothing sales in continental Europe would drag on annual profits, sending its shares down more than 10 per cent.
In a trading update on Thursday — which came two months after the company announced it was considering splitting off the fast-fashion business from the group — the food and retail conglomerate said it expected adjusted operating profit and adjusted earnings per share to be below last year. It had previously forecast that earnings would rise.
The company said Primark’s UK like-for-like sales in the 16 weeks to January 3 rose 1.7 per cent, compared with a fall of 5.7 per cent in continental Europe, which accounted for 49 per cent of Primark’s total sales.
“Overall, Primark’s sales growth in the period was below our previous expectations and we now expect Primark’s sales growth in the first half of 2026 to be in the low single digits,” ABF said. “In a difficult trading environment, we significantly increased markdowns to manage inventory levels effectively, which impacted profitability.”
The London-listed group said that if Primark’s current sales trends continued in the second half, it expected the adjusted operating profit margin for the full year to be approximately 10 per cent “as we continue to invest in growth”.
The group also reported weak US sales in its food business with the impact of ongoing consumer weakness being “more acute than anticipated” in its cooking oils and bakery ingredients segments.
Shares fell 12 per cent in early trading in London.
ABF announced in November that it was weighing splitting Primark from its food business as part of a strategic review.
George Weston, chief executive, said at the time that “the financial markets will better understand the food business if Primark were separated into a standalone listed business”, adding: “There’s a realistic chance of this happening.”
ABF’s lower-profile food business spans groceries, ingredients and agricultural products. Primark has been forced to contend with rising competition from Chinese fast-fashion companies Shein and Temu.
The review could take up to two years to complete, Weston said in November, and was “not a done deal”.
This is a developing story