Primark Owner Cuts Profit Forecast as European and American Shoppers Reduce Spending

Associated British Foods has downgraded its annual profit guidance following a sharp decline in sales at Primark, its flagship retail division. The FTSE 100 conglomerate cited weakening consumer sentiment across continental Europe and the United States as the primary driver of diminished trading performance during the 16-week period ending January 3.

Like-for-like sales at Primark’s continental European stores contracted by 5.7 per cent, signalling a marked deterioration in customer footfall and spending patterns. The company attributed this decline to budget-conscious shoppers curtailing retail expenditure at a time of economic uncertainty. In the United States, ABF reported volatile trading conditions that have unsettled consumer behaviour and reduced store traffic.

George Weston, chief executive of ABF, acknowledged the difficult trading environment in a trading update. The executive stated that the group anticipates challenging market conditions to persist in the near term, necessitating a revision of profit forecasts. Weston noted that whilst the United Kingdom market demonstrated resilience with like-for-like sales growth, this positive performance could not offset weakness experienced elsewhere.

ABF now expects headline operating profit for the entire group to fall below the previous year’s figure. Primark’s sales growth projection for the first half of the financial year has been reduced to low single-digit growth, a considerable shortfall from City analyst forecasts predicting 4 per cent expansion. The profit warning prompted a sharp market reaction, with ABF shares declining 11 per cent to settle at £19.06½.

The trading update represents a setback for a company that commands approximately half its group revenue from Primark operations. The retail chain, widely regarded as ABF’s principal asset, operates more than 450 stores across 55 countries. The subdued performance adds pressure to ABF’s broader business operations, which have already contended with losses in the sugar division.

ABF’s sugar business has struggled with depressed European pricing and operational disruptions following the closure of its Vivergo bioethanol facility in Yorkshire last August. The company’s food division similarly reported mixed results, with anticipated consumer weakness in North America driving lower sales projections. Management maintained existing forecasts for sugar and agriculture segments whilst downgrading expectations for grocery and ingredients businesses.