Primark profits fall 11% as AB Foods presses ahead with planned stock market split

Associated British Foods has reported a 14 per cent fall in adjusted pre-tax profits to £1.46bn, as weaker consumer spending and pressure on Primark’s retail performance weigh on the group ahead of its planned separation of the fashion chain.

Primark’s owner said profits declined to £ 1.46 bn for the year to September 12, down from the previous year, with the retailer recording an approximately 11 per cent fall despite higher sales.

AB Foods is pressing ahead with plans to separate Primark into an independently listed business, targeting a stock market listing by December next year. The move would leave the remaining group focused on its food businesses.

Primark’s annual sales rose 4 per cent to £9.8bn, supported by new store openings across Europe, the US and through franchise operations in the Middle East. However, like-for-like sales fell 2.6 per cent, reflecting what the company described as a “challenging consumer environment across most markets”.

The retailer said its performance in Britain improved after efforts to cut prices and strengthen its reputation for value among increasingly cost-conscious shoppers.

But recovery elsewhere in Europe remains at an earlier stage, with AB Foods highlighting particularly weak consumer sentiment across several markets.

Further store openings are expected to support Primark’s growth in the new financial year, as the business seeks to rebuild momentum ahead of its proposed demerger.

The group’s grocery division provided a more positive contribution, with sales increasing 3 per cent to £4.2bn compared with the previous year.

Its Twinings tea business delivered positive international growth, although performance was constrained by weaker sales in Britain and France. AB Foods attributed the decline partly to the prolonged hot summer, which reduced demand for tea.

The results underline the challenge facing AB Foods as it prepares to separate its best-known retail brand from its wider food operations. While Primark continues to expand internationally, falling like-for-like sales and lower profits highlight the pressure on its business model as shoppers remain cautious about discretionary spending.