Primark has started the new financial year below expectations, prompting its owner to warn of lower growth and pressure on profits as weak consumer confidence in Europe offsets steadier trading in the UK.
Associated British Foods PLC (LSE:ABF) said on Thursday that Primark’s sales growth over the 16 weeks to 3 January was weaker than anticipated and that growth in the first half of 2026 is now expected to be in the low single digits.
The retailer has also increased markdowns, or price reductions, to clear stock, which has weighed on profitability.
George Weston, chief executive of Associated British Foods, said Primark had experienced “a challenging start to the financial year, with a mixed performance”. While trading and market share improved in the UK, conditions in continental Europe remained difficult and consumer demand was uneven in the US.
In the UK, Primark delivered sales growth of about 3%, with like-for-like growth of around 1.7% in what the company described as a tough clothing market, particularly over Christmas. Like-for-like sales strip out the effect of new store openings and closures and are a key measure of underlying demand.
The retailer said womenswear performed particularly well and that investments in product, pricing and digital engagement, including Click and Collect, had helped it gain market share.
That progress was outweighed by weaker trading elsewhere. In continental Europe, which accounts for nearly half of Primark’s sales, like-for-like sales fell by an estimated 5.7% as consumer confidence remained subdued.
Similar initiatives to those rolled out in the UK are only just getting under way in the region. In the US, Primark said the retail environment had been volatile, affecting footfall and spending.
Overall, Primark’s sales growth for the period was around 1%, below previous expectations. Store openings, including the first franchise store in Kuwait, added about 4% to sales growth, but this was not enough to offset softer underlying demand.
If current trends persist, Associated British Foods said Primark’s adjusted operating profit margin for the full year would be about 10%, similar to the first half, as it continues to invest in the business. This compares with a stronger prior year that included a one-off £20 million benefit.
The weaker showing at Primark fed through to the wider group outlook. Associated British Foods said it now expects group adjusted operating profit and adjusted earnings per share to be below last year.
Elsewhere in the group, trading was mixed. The food businesses saw continued weakness in the US, particularly in cooking oils and bakery ingredients, where consumer demand has fallen more sharply than expected.
As a result, both the Grocery and Ingredients divisions are now expected to deliver profits moderately below last year. Guidance for Sugar and Agriculture was unchanged.
Associated British Foods said final revenue figures for the period would be published on 22 January.