ii view: profit warning hammers Primark owner AB Foods

Trading update for first 16 weeks of financial year to 3 January

Chief executive George Weston said:

“In a challenging consumer environment, our focus is on factors within our control, including initiatives now underway in Europe aimed at improving performance. While we expect the tough trading conditions to continue in the short term, we remain confident in the overall prospects for the Group."

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ii round-up:

Associated British Foods (LSE:ABF) today flagged a challenging start to it financial year to mid-September 2026, with the owner of Primark stores now expecting a fall in annual adjusted operating profit compared to a previous forecast for growth.

Weaker-than-expected European Primark sales and tough US cooking oil and baking ingredient sales are now expected to result in a full-year group-wide profit margin of around 10%. The City had been forecasting 11.7%, with analysts now expected to cut profit forecasts by around a tenth.

Shares in the FTSE 100 company fell 13% in UK trading having come into this latest news up 4% in 2025. That’s comfortably below a 21.5% gain for the FTSE 100 index last year. Fellow clothing retailer Next (LSE:NXT) gained 44% in 2025.

AB Foods operates across the five divisions of retail, grocery, ingredients, agriculture and sugar. Management continues to review the strategic and value benefits of potentially separating the retail and food businesses, with an update expected in April.

UK Primark sales were "encouraging", up 3%, with like-for-like sales growth of around 1.7%, although management called it a "difficult clothing market, particularly over Christmas". It was worse in continental Europe, which accounts for 49% of Primark sales, where weak consumer confidence caused a 5.7% decline in like-for-like sales. Total European sales, excluding the UK and Ireland, were down 1%.

UK and Ireland total sales, representing 45% of Primark’s total, rose 1.1%, with same store sales up 2%. US sales, accounting for the balance of 6%, were summarised by management as "volatile".

Ingredient related food sales fell 3% and Sugar sales retreated 2%. A further update providing final revenue totals by business segment for the 16-week period will be announced on 22 January.

ii view:

Started in 1935, the retailing and foods business today operates across more than 50 countries. Primark generated more revenues during the first half of 2025 at 47%. That was followed by Grocery at 22%, Sugar and Ingredients each at around 11%, and Agriculture the balance of 9%. Food brands include Mazola oil, Silver Spoon, Twinings, Ovaltine, Ryvita, Kingsmill, Allison’s, Jordans and Dorset cereals, Patak’s, Rajah’s and Blue Dragon.

For investors, tough economic conditions for countries such as France likely contributed to falling European same store sales. Food sales in the US proved pressured. Unseasonal weather can impact both Primark sales and sugar production, while total overseas revenues totalling around two-thirds of the group total can offer currency headwinds.

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On the upside, management actions to improve performance, including initiatives for Primark Europe, are being pursued. An ongoing review could see the retail and food businesses separated, potentially enhancing shareholder value. A push online now includes Click and Collect services for more than 180 UK stores, while a forecast dividend yield of around 3% sits above the 1.4% for rival clothes retailer Marks & Spencer Group (LSE:MKS).

In all, pressured sales now generate firm caution, and shareholders will be eager to hear the outcome of management’s ongoing structural business review.

Positives:

• Diversified business type and geographical footprint
• Expanding Primark store numbers

Negatives:

• Uncertain economic outlook
• Factors outside of its control like food commodity prices and currency moves

The average rating of stock market analysts:

Hold