Shares in Associated British Foods PLC (LSE:ABF) fell 11% to 1,908p on Thursday after its fashion chain Primark started the new financial year below expectations, prompting warnings of weaker growth and pressure on profits.
The sharp sell-off followed a trading update covering the 16 weeks to 3 January, in which ABF said Primark’s sales growth had been weaker than anticipated. Sales growth in the first half of 2026 is now expected to be in the low single digits, a downgrade that rattled investors.
Primark has also stepped up markdowns, or price reductions, to clear excess stock, a move that has weighed on profitability during the period.
George Weston, chief executive of Associated British Foods, said Primark had faced “a challenging start to the financial year, with a mixed performance”.
He pointed to improving trading and market share gains in the UK, offset by continued weakness in continental Europe and uneven consumer demand in the US.
In the UK, Primark recorded sales growth of about 3%, with like-for-like growth of around 1.7% in what the company described as a difficult clothing market, particularly over Christmas.
Like-for-like figures exclude the impact of new store openings and closures and are used as a gauge of underlying demand.
Womenswear performed particularly well, according to the group, supported by investments in product ranges, sharper pricing and increased digital engagement, including Click and Collect.
Those gains were more than offset elsewhere. In continental Europe, which accounts for almost half of Primark’s sales, like-for-like sales fell by an estimated 5.7% as consumer confidence remained weak. Similar initiatives to those introduced in the UK are only just being rolled out across the region. In the US, Primark said a volatile retail environment had affected footfall and spending.
Overall, Primark’s sales growth for the period was around 1%, below earlier expectations. New store openings, including the first franchise store in Kuwait, contributed about 4% to sales growth, but this was not enough to counter softer underlying trading.
If current trends continue, ABF said Primark’s adjusted operating profit margin for the full year would be about 10%, in line with the first half, as it continues to invest in growth. This compares with a stronger prior year that benefited from a one-off £20 million profit boost.
The weaker performance at Primark has fed through to the wider group outlook. ABF now expects group adjusted operating profit and adjusted earnings per share to come in below last year.
Elsewhere, trading across the group’s food businesses was mixed. In the US, consumer demand weakened further in categories such as cooking oils and bakery ingredients, leading ABF to become more cautious on the outlook.
As a result, both the Grocery and Ingredients divisions are now expected to deliver profits moderately below last year, while guidance for Sugar and Agriculture was left unchanged.
ABF said it would publish final revenue figures for the period on 22 January.