Associated British Foods (ABF) has warned that its annual profit will fall as heavy discounting at its Primark fashion chain and weaker US demand for food ingredients weigh on results, sending shares down as much as 12%.
Primark, which trades as Penneys in Ireland, saw like-for-like sales drop 2.7% in the 16 weeks to January 3, below analysts’ expectations. While the UK market showed growth, weaker performance in Europe and a “volatile” US retail environment hurt consumer sentiment and footfall, the company said. Heavy discounting to clear stock also squeezed margins.
CEO George Weston said trading conditions are expected to remain challenging in the short term but added that plans are in place to improve performance in Europe. ABF now expects group adjusted operating profit and earnings per share to fall below last year’s levels, having previously forecast growth for 2026.
The warning highlights pressure on retailers and food producers as European consumers tighten spending and US economic uncertainty weighs on demand, particularly among Hispanic customers. Acting Finance Director Joana Edwards noted that muted US consumer demand has affected ABF’s grocery business since April. She said anti-immigration raids in the US have prompted some Hispanic shoppers to move to online purchasing, while competitors including Constellation Brands have also reported weaker sentiment in the community.
ABF’s food business, which produces ingredients ranging from sugar to bakery products, maintained its outlook for sugar and agriculture but cut forecasts for grocery and ingredients. The company cited unexpectedly sharp weakness in US demand for cooking oils and bakery ingredients as a factor in the revised guidance.
In parallel, the UK Competition and Markets Authority (CMA) said it would fast-track its review of ABF’s proposed acquisition of bread brand Hovis from private equity firm Endless. The deal, first announced in August, would add the 135-year-old Hovis to ABF’s portfolio, which includes Kingsmill, Allinson’s, and Sunblest brands, strengthening the company’s position amid falling demand for packaged sliced loaves.
Hovis holds around 18% of the pre-sliced, packaged bread market, while ABF’s Allied Bakeries accounts for about 6%, with market leader Warburtons at roughly 28%. ABF said it will work constructively with the CMA to demonstrate the benefits of the transaction and achieve regulatory clearance as efficiently as possible.
A spokesperson for Hovis confirmed the company will continue cooperating with the CMA to secure approval for the deal as soon as possible.
The latest profit warning follows a series of challenges for ABF, including a drop in full-year profits reported in November and ongoing debates over a potential spin-off of Primark. Investors will be watching closely to see whether ABF can stabilise margins and deliver on its European recovery plans amid uncertain consumer demand.