Penneys/Primark's owner Associated British Foods warned that underlying sales at the budget fashion chain will decline in its second half, as improving UK trading is outweighed by weaker demand in continental Europe, sending its shares sharply lower.
The group, which also owns major grocery, sugar, agriculture and ingredients businesses, also cautioned today that it expected the consumer environment "to remain uncertain".
Chief executive George Weston said the trading environment was characterised "by consumer caution, geopolitical uncertainty and inflation."
Shares in AB Foods were down 12% today, wiping out its gains this year.
Weston said he was concerned about the potential impact of the UK government's November budget on consumers, given the prospect of higher taxes, and rising unemployment.
Primark's total like-for-like sales for its second half to September 13 were expected to be down around 2%, AB Foods said.
Like-for-like sales in the UK and Ireland were expected to be close to flat, helped by favourable weather, and improving from the 6% fall recorded in the first half.
Primark's second half sales in the US were expected to be strong, and the retailer has started to raise prices in response to President Donald Trump's tariffs.
However, in Europe, while sales have risen during the period in Spain, Portugal and in Central and Eastern Europe, they have fallen in France, Italy and Germany.
"The consumer is in a very difficult and negative place across so much of continental Europe now," Weston told Reuters.
Analysts at Panmure Liberum said trading at Primark in Europe was "softer than expected" but maintained a 'buy' rating.
Separately today, Zara owner Inditex, the world's biggest listed fast-fashion retailer, reported a better start to its autumn sales.
AB Foods said overall second half trading in its food businesses, which include grocery brands such as Twinings tea, Jordans cereals and Ovaltine drinks, was in line with its expectations.
Last month, the group bought the Hovis bread brand. It also said it was closing its Vivergo bioethanol plant after the UK government refused financial support.
Analysts forecast the group as a whole will report a 2024/25 adjusted operating profit below the £2 billion made in 2023/24, mainly because AB Foods expects its sugar business to report a loss.
Meanwhile, the boss of AB Foods said the company had started to raise prices at its US stores in response to President Donald Trump's tariffs.
"It's just starting now and it will be fairly broadly across the range, we'll remain as competitive as ever," George Weston, CEO of Associated British Foods told Reuters.
"The price rise will be in double digits, that's what we need to do to recover tariff costs," he added.
He said Primark had no plans to raise Primark's prices in the UK this side of Christmas.
