Associated British Foods warned annual profit would fall after a sharp slowdown at its Primark fashion chain and weaker US demand hit its food businesses, sending its shares down 10 percent on Thursday.
The profit warning highlights growing strain on retailers and packaged food makers as shoppers in Europe and the US tighten spending amid stubborn cost-of-living pressures.
Like-for-like sales at Primark dropped 2.7 percent in the 16 weeks to January 3, below forecasts, AB Foods said. Growth in the UK was offset by weakness in Europe and a “volatile” US retail environment that dented sentiment and footfall.
AB Foods said heavy discounting at Primark to clear stock in a tough demand backdrop had squeezed margins.
“We expect the tough trading conditions to continue in the short term,” said CEO George Weston, adding that plans were in place to lift performance in Europe.
The company now sees group adjusted operating profit and earnings per share below last year’s levels. It had previously forecast earnings growth for 2026.
The British company, whose food business makes products from sugar to bakery ingredients, has been weighing a spin-off of Primark after reporting a drop in full-year profit in November, mainly driven by weakness in its sugar unit.
On Thursday, it kept its outlook for sugar and agriculture but cut forecasts for grocery and ingredients, citing unexpectedly sharp weakness in US demand for cooking oils and bakery ingredients.
By Yadarisa Shabong
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