Associated British Foods shares plummet by over 10% after Primark profit warning

Primark owner Associated British Foods warned profits at the retailer will be lower than expected after a ‘challenging start to the year’.

ABF said Primark had suffered weaker sales growth in the 16 weeks to 3 January amid a ‘challenging consumer environment’ and that it expects growth in the first half of the year to be in the low single digits.

Shares in the London-listed company fell by over 10 per cent on the open. 

The discount retailer delivered like-for-like sales growth of around 1.7 per cent in a ‘difficult clothing market, particularly over Christmas’ in the UK.

Growth forecasts cut: Primark owner ABF has slashed its forecasts for the retailer

While Primark grew its share of the UK market, it said consumer confidence in Europe remains weak with like-for-like sales down around 5.7 per cent. Its roll-out in the US has also proved difficult amid a ‘volatile’ environment.

ABF said sales growth 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.

‘In a difficult trading environment, we significantly increased markdowns to manage inventory levels effectively, which impacted profitability.’

It added: ‘We have a broad range of initiatives in place and planned for the coming months, which we expect to drive improved sales and profitability, particularly in Europe. 

'However, if Primark's current sales trends were to continue in the second half, we would expect the adjusted operating profit margin for the full year to be approximately 10 per cent, similar to the first half, as we continue to invest in growth.’

ABF has previously indicated it may choose to spin off Primark and its food business, but is committed to 'maintaining majority ownership' of both businesses. 

Its most recent update showed ABF's food business is also struggling, noting ‘ongoing consumer weakness’ in its cooking oils and bakery ingredients businesses in the US.

‘As a result, we now expect both our Grocery and Ingredients segments to deliver adjusted operating profit for the full year that is moderately below last year. In Grocery, the effect of phasing means the impact will be more significant in the first half of the year.

‘In Sugar and Agriculture, there is no change to the guidance we provided in November 2025.’

Dan Coatsworth, head of markets at AJ Bell said: '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. It’s a far cry from the halcyon days where Primark could do no wrong.

'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.'

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