Associated British Foods shares slide after Primark sales slump
Shares in Associated British Foods (ABF), the owner of Primark, tumbled in early trading on Thursday morning after the FTSE 100 giant warned of a “difficult trading environment” and downgraded the fashion retailer’s growth forecasts.
ABF, which owns the chain alongside its wholesale food business, said like-for-like sales across continental Europe declined as much as 5.7 per cent in the sixteen weeks to 3 January, partially offset by 1.7 per cent growth in the UK and an improved performance in the US.
“Consumer confidence remains weak,” ABF said, adding: “the retail environment was volatile, which impacted consumer sentiment and footfall.
“In a difficult trading environment, we significantly increased markdowns to manage inventory levels effectively, which impacted profitability.”
The firm said sales growth was below previous expectations as it cut forecasts for the first half of 2026 to be in the low single digits.
ABF shares fell as much as 11.7 per cent to 1,901p in early trading on Thursday. The stock is down 5 per cent over the past year.
Food sales show signs of weakness
ABF’s food business was unable to cushion the blow, with the firm warning of “ongoing consumer weakness” leading to lower sales.
Demand for cooking oils and bakery ingredients was especially soft, the company warned, as it downgraded profit expectations for its grocery and ingredients segments to “moderately below last year.”
“In a challenging consumer environment, our focus is on factors within our control,” said ABF chief executive George Weston.
“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.”
Charles Allen, Senior Industry Analyst a Bloomberg Intelligence, said: “Primark faces far greater competition in budget clothing and the lack of an online presence outside the UK is challenging sales, leaving margin exposed. ABF’s potential split of food and retail divisions now faces both being in a weakened position.”
ABF mulls Primark spin-off
In November, ABF said it was considering selling off Primark as it undertook a “comprehensive review” of the business.
ABF, which founded Primark – then known as Pennies – in Dublin in 1969, said that “no decision” has been taken yet.
The strategic review will be carried out with the help of the advisory firm Rothschild & Co, with the backing of its largest shareholder, the Weston family’s Wittington Investments.
The FTSE 100 company said the family, which owns 59 per cent of ABF, remained “committed to maintaining majority ownership of both businesses”.
ABF today insisted its investigation into spinning off Primark from the business will not be impacted by the retailer’s recent sales slump.
“The purpose of the review is to assess the long term benefits of the separation,” interim finance director Joana Edwards said in a call with analysts.
“So today’s trading update is not impacting that; the core rationale remains the same.”
A final decision over the spin-off is expected in April.