Associated British Foods has today warned its annual profit would fall as heavy discounting at its Primark fashion business and weaker US demand hit food ingredient sales, driving its shares as much as 12% lower.
Primark trades as Penneys.
Today's profit warning underscores mounting pressure on retailers and food makers as European consumers tighten spending and economic anxiety weighs on some US customers.
Muted US consumer demand, notably among Hispanic customers, has weighed on AB Foods' grocery business "following everything that's been happening from April onwards," acting Finance Director Joana Edwards told analysts.
Anti-immigration raids championed by US President Donald Trump have affected the Hispanic population in the US, prompting some to switch to online shopping.
Constellation Brands, the US importer of Modelo and Corona beer brands, has also reported weaker consumer sentiment recently, particularly among Hispanics.
AB Foods said that like-for-like sales at Primark dropped 2.7% in the 16 weeks to January 3, below forecasts. Growth in the UK was offset by weakness in Europe and a "volatile" US retail environment that dented sentiment and footfall.
AB Foods said heavy discounting at Primark to clear stock in a tough demand backdrop had squeezed margins.
"We expect the tough trading conditions to continue in the short term," said CEO George Weston in a statement, adding that plans were in place to lift performance in Europe.
The British company now sees group adjusted operating profit and earnings per share below last year's levels. It had previously forecast earnings growth for 2026.
The company, whose food business makes products from sugar to bakery ingredients, has been weighing a spin-off of Primark after reporting a drop in full-year profit in November.
Today it kept its outlook for sugar and agriculture but cut forecasts for grocery and ingredients, citing unexpectedly sharp weakness in US demand for cooking oils and bakery ingredients.
Meanwhile, the UK competition regulator said today it would fast-track its probe of Associated British Foods' deal to buy bread brand Hovis from private equity firm Endless to an in-depth investigation.
The move comes just weeks after the Competition and Markets Authority (CMA) said it would examine the deal, which would add another major UK bread brand to ABF's portfolio and strengthen its position amid falling demand for packaged sliced loaves.
Primark-parent ABF, which owns the Kingsmill, Allinson's, and Sunblestbrands, announced the deal to buy 135-year-old Hovis for an undisclosed sum in August last year.
Hovis has about 18% of the pre-sliced, packaged bread market, while ABF's Allied Bakeries has about 6%. Industry leader Warburtons has about 28%.
"Our priority is to achieve regulatory clearance as efficiently as possible and we are pleased to have agreed with the CMA that we will fast-track to the in-depth and detailed final phase of their merger review," an ABF spokesperson said.
"We will continue to work constructively with the CMA to demonstrate the benefits of the transaction."
A Hovis spokesperson said the company will continue working with the CMA to secure clearance for the deal as soon as possible.
