Primark's parent company, Associated British Foods PLC (LSE:ABF), was downgraded by analysts at RBC Capital Markets as they see the fast-fashion chain and parts of its food business facing increasing pressure.
Primark's like-for-like sales are seen as likely to continue lagging behind peers as competition intensifies and consumer demand weakens in key European markets.
"We are concerned that Primark's value for money perception may be compromised by its attempts to elevate its offer," the analysts said, putting its value positioning under threat from online rivals such as China's Shein.
Furthermore, the lack of a full digital offering outside the UK leaves it exposed as more shopping shifts online.
Profit margins, which are already relatively low, are also expected to be squeezed further due to higher freight and raw material costs, including oil-linked inputs.
"In addition, Primark is continuing to expand its space footprint at 4-5% per year and may see higher promo activity as a result of more challenging apparel markets, particularly outside the UK, where we think it needs to localise its offer more."
Across the wider group, RBC highlighted a mixed performance in food, noting this has been impacted by US pricing as earlier price increases in cooking oils and ingredients unwind.
The broker cut profit forecasts by 4-7% for the next three years and said the current valuation reflects a "muted" EPS outlook, with limited earnings growth expected in the near term.
RBC downgraded the shares to 'underperform' from 'sector perform' and cut its price target to 1,850p from 2,050p, versus from the last close at around 1,920p.