By Karim Hammam
Associated British Foods (ABF), the owner of Primark, reported a 14% decline in adjusted pre-tax profits to £1.46 billion for the year ended September 12, citing a challenging consumer environment and macroeconomic headwinds. The company warned that profits are on track to fall again in the next financial year amid weakness in its sugar operation.
Profit Decline and Consumer Challenges
Profits across the Primark retail business weakened by around 11% over the period. While total sales rose 4% to £9.8 billion, driven by new store openings in Europe, the United States and franchise sites in the Middle East, like-for-like sales fell 2.6% due to what the retailer described as a challenging consumer environment across most markets. UK like-for-like sales improved after efforts to lower prices and enhance value perception.
Cost Pressures and Pricing Strategy
Chief executive George Weston told the Press Association that ABF is not planning price increases this year as it continues to invest in pricing. However, he stressed the group faces significant cost inflation from higher energy costs linked to the conflict in the Middle East. Primark remains in an earlier stage of recovery in Europe, where consumer sentiment is particularly weak.
Grocery Division Growth
ABF's grocery division saw sales grow 3% to £4.2 billion. The Twinings tea business reported positive international growth but was held back by lower sales in the UK and France due to a long hot summer reducing tea demand. The UK sports nutrition division achieved double-digit growth, and Ryvita trading improved after restructuring last year.
Demerger on Track
ABF reiterated its plan to demerge Primark via a stock market listing by December 2027, leaving a food-focused standalone business. Weston said the demerger remains on track, positioning both businesses for medium and long-term growth prospects.
