By Islam El-Sakka
Associated British Foods (ABF), the owner of discount retailer Primark, has warned it remains “cautious” about the future after reporting a sharp decline in annual profits. Pre-tax profits for the year to September 12 fell 14% to £1.46 billion, while Primark’s retail operating profit weakened by around 11% ahead of a planned stock market demerger.
Profit Decline Amid Challenging Environment
The consumer giant attributed the slump to a “challenging” trading environment and macroeconomic headwinds. Like-for-like sales at Primark dropped 2.6% due to weak consumer sentiment across most markets, though UK like-for-like sales improved after price cuts aimed at enhancing value perception.
Primark Sales Growth Driven by New Stores
Despite the profit decline, Primark’s total sales rose 4% to £9.8 billion, fueled by new store openings in Europe, the United States and franchise locations in the Middle East. The company expects further store openings to support growth in the new financial year.
Demerger on Track for December 2027
ABF reiterated its plan to separate Primark via a stock market listing by December 2027, leaving a food-focused standalone business. Chief executive George Weston said the group is on track to complete the demerger, positioning both businesses for medium and long-term growth.
Cost Pressures and Consumer Sentiment
Weston noted the company faces significant cost inflation from higher energy costs linked to the Middle East conflict, but said ABF is not planning price increases this year as it continues to invest in pricing. The grocery division saw sales grow 3% to £4.2 billion, with double-digit growth in sports nutrition and improved Ryvita trading after restructuring.
