Primark owner ‘cautious’ about the future as profits fall again

Primark’s owner, Associated British Foods (ABF), has said it is feeling “cautious” about the future after unveiling another slump in profits.

The discount retailer said profits are on track to fall again next year amid ongoing weakness in certain parts of its operation.

Chiefs at the consumer giant said trading over the past year was reflecting a “challenging” environment and “macroeconomic headwinds”, after reporting pre-tax profits slipped by a huge 14% to £1.46billion for the year to September 12, compared with the year before.

For the same year, profits across Primark’s retail business weakened by around 11%, before the brand’s planned de-merger.

ABF said it still expects to split off the Primark business in a stock market listing by December next year, leaving a food-focused standalone business.

Primark saw sales increase by 4% to £9.8 billion for the year, driven by new store openings in Europe, the US and through franchise sites in the Middle East.

Like-for-like sales were 2.6% lower due to a “challenging consumer environment across most markets”, the retailer said.

It added that UK like-for-like sales improved after efforts to lower prices and improve its value perception among shoppers.

ABF chief executive George Weston told the Press Association that the company is not planning any price increases this year as it continues to invest in pricing.

However, Mr Weston stressed that the group is facing significant cost inflation from higher energy costs linked to the conflict in the Middle East.

Primark said it remains in an “earlier” stage of recovery in Europe, where it highlighted particularly weak sentiment among consumers.

The brand said it expects further store openings to boost growth in the new financial year.

ABF told shareholders that sales grew by 3% to £4.2 billion in its grocery division, compared with a year earlier.

Its Twining business reported positive international growth but was “held back by lower sales in the UK and France” due to the long hot summer impacting tea demand.

In the UK, the group saw double-digit growth in its sports nutrition division and improved trading in Ryvita after restructuring last year.

George Weston, chief executive of ABF, said: “Looking ahead, while we remain cautious about consumer sentiment and commodity costs, we will continue our sharp focus on driving financial performance and delivering the growth opportunities from capital investments across the group.

“We are on track to complete the demerger of Primark from AB Foods in December 2027, positioning both businesses to deliver on their medium and long-term growth prospects.”