Associated British Foods Plc cuts its profit outlook on Thursday due to weaker performances at its Primark retail chain and US foods operations, sending shares in the conglomerate more than 11% lower.
In the UK, Primark sales growth of 3% in the 16 weeks to January 3 included a like-for-like performance of around 1.7% "in a difficult clothing market, particularly over Christmas", the company said in a trading statement.
However, in Continental Europe sales slumped by 5.7% as consumer confidence remained weak while a "volatile" US market also led to lower footfall at its stores, leading to a 2.7% fall in overall like-for-like sales with sales growth in the first half of 2026 now forecast to be in the low single digits.
"We now expect group adjusted operating profit and adjusted EPS to be below last year," AB Foods said in a trading statement.
"In a difficult trading environment, we significantly increased markdowns to manage inventory levels effectively, which impacted profitability."
"We have a broad range of initiatives in place and planned for the coming months, which we expect to drive improved sales and profitability, particularly in Europe," the company said, but flagged that adjusted full-year operating profit margin would be around 10%, if current sales trends persisted.
The tougher US market also hit AB Food's US cooking oils and bakery ingredients operations, leading to a forecast of moderately lower adjusted operating profit at its grocery and ingredients divisions.
"The impact has been more acute than anticipated and we are more cautious on the outlook," AB Foods added.
Sugar and agriculture divisional guidance remained in line, leaving overall group revenue broadly flat and underscoring a more cautious outlook despite management's confidence in the group's longer-term prospects.
Reporting by Frank Prenesti for Sharecast.com