ABF flags tougher year ahead as Primark’s Europe stumble drags on profit
Associated British Foods has warned that Group adjusted operating profit and adjusted EPS will be below last year, as Primark’s weak trading in continental Europe and heavier markdowns weigh on margins. The update covers the 16 weeks to 3 January 2026 and sets a more cautious tone for the 2026 financial year.
There are bright spots – Primark gained UK market share and womenswear was strong – but the key message is that consumer pressure in Europe and softer demand in parts of the US food markets are proving more stubborn than hoped. Management is leaning on actions within its control: tighter inventory, sharper value for customers, and a pipeline of store openings and digital engagement.
Primark: UK resilience, European softness, and a margin reset
Primark’s sales growth in the period came in below prior expectations. UK sales rose around 3% with like-for-like (LFL) up around 1.7% in a difficult clothing market over Christmas, and Primark gained share of the UK clothing, footwear and accessories market (Kantar, 12 weeks to 7 December 2025). The US was volatile but grew, helped by store roll-out. Continental Europe was the weak link, with LFL down around 5.7% as consumer confidence remained soft and Primark’s improvement initiatives are only just getting going.
To manage stock, Primark “significantly increased markdowns” in the period, which hit profitability. Management now expects the adjusted operating profit margin for the full year to be approximately 10% if current sales trends continue into the second half. First-half sales growth is expected to be in the low single digits.
Primark regional performance (estimates for the 16 weeks to 3 January 2026)
| Region | % of Primark sales | Like-for-like sales growth | Total sales growth |
|---|---|---|---|
| UK only | Not disclosed | +1.7% | +3% |
| UK and Ireland | 45% | +1.1% | +2% |
| Europe (ex UK & Ireland) | 49% | (5.7)% | (1)% |
| US | 6% | Not disclosed | +12% |
| Primark total | Not disclosed | (2.7)% | +1% |
Store expansion contributed around 4% to sales growth in the period, including the first franchise store opening in Kuwait. That new space offset negative LFL performance, hence total Primark sales still grew by about 1% despite the LFL decline.
Why a ~10% margin matters
Adjusted operating profit margin at roughly 10% for the full year points to sustained pressure from markdowns and operating deleverage in Europe. Management is still investing for growth, so the guidance assumes continued spending on the customer proposition and expansion. Note the comparator is also a touch tougher: the first half of 2025 included a non-recurring £20 million profit benefit.
The upside case here is clear – if the current slate of product, pricing and digital initiatives lifts sales in Europe, margins should improve from this trough. The downside is that if European demand remains weak, heavy markdowns and slower sell-through could persist longer than planned.
Food divisions: mixed start, US weakness bites in Grocery and Ingredients
Outside Retail, trading was mixed. In the US, consumer weakness was sharper than expected in certain categories, particularly for cooking oils and bakery ingredients. ABF now expects adjusted operating profit in both Grocery and Ingredients to be moderately below last year, with a heavier impact in Grocery in the first half due to phasing.
Guidance for Sugar and Agriculture is unchanged from November 2025. That stability helps, but it does not fully offset the pressure in Grocery and Ingredients.
Group revenue change for the 16-week period (estimate)
| Segment | Revenue change (actual currency) | Revenue change (constant currency) |
|---|---|---|
| Retail | +4% | +1% |
| Grocery | In line | +1% |
| Ingredients | (3)% | (2)% |
| Sugar | (2)% | (5)% |
| Agriculture | (4)% | (4)% |
| Group | +1% | (1)% |
On the back of this mix, ABF now expects Group adjusted operating profit and adjusted EPS to be below last year. We will get final revenue by segment for the 16-week period on 22 January 2026.
My take: cautious but not broken
This is a reset, not a rethink. The weak European consumer and higher markdowns have clipped Primark’s wings for now, and the Food businesses have lost a bit of momentum in the US. Guidance for Group profit and EPS below last year will not delight the market.
That said, the UK story at Primark is encouraging – market share gains and improving value perceptions are exactly what you want to see. New space is contributing, digital engagement including Click & Collect is building, and there is a clear plan to transplant the UK playbook into Europe. If those levers bite, the 10% margin guide could prove conservative. Until then, expect volatility and keep an eye on inventory discipline – the quicker markdowns normalise, the better for margin repair.
What to watch next
- 22 January 2026: final revenue by segment for the 16-week period.
- Primark Europe LFL trend: does the decline moderate as initiatives take hold?
- Markdown cadence: any sign of fewer discounts would be margin supportive.
- Grocery and Ingredients profitability: depth of the “moderately below last year” outcome, especially in H1.
- Store roll-out and franchise progress: contribution from new space, including further franchise openings after Kuwait.
Jargon buster
- Like-for-like (LFL) sales: sales growth from stores open at least a year, stripping out new space.
- Constant currency: growth calculated using last year’s exchange rates to remove FX effects.
- Adjusted operating profit margin: operating profit before certain items, as a percentage of sales, used to gauge underlying profitability.
- Adjusted EPS: earnings per share on an adjusted basis, a common measure of underlying performance.
Bottom line for investors
The near-term outlook has softened: Primark’s margin is guided to around 10% and Group profit and EPS are now set to come in below last year. The long-term thesis – scale retail with structural growth levers and a diversified food portfolio – remains intact, but execution in Europe and a recovery in US food demand are the swing factors for 2026.
This announcement was classified as containing inside information, and is now in the public domain via RNS. We will learn more on the investor call today and in the 22 January disclosure. For now, expectations have been reset – the next few months are about delivering on the fix-it plan in Europe and proving that markdown pressure is temporary, not structural.
