Associated British Food sales sank on Thursday after the group reported that gloomy early summer weather had hit sales at Primark.
Primark’s UK like-for-like sales fell 0.6 per cent in its third quarter and are set to slip by around 3.1 per cent in the three months to 14 September, AB Foods told shareholders.
This is likely to leave the retailer’s UK comparable store sales down around 2 per cent overall in its second half.
The group said it saw average selling prices increase thanks to the ‘mix’ of sales while it had successful markdown promotions.
AB Foods shares fell 5.11 per cent or 127.77p to 2,373.23p on Thursday, having risen over 19 per cent in the last year.
AB Foods said shopper footfall was ‘impacted by challenging weather, particularly in April and June’, which took its toll on seasonal women’s clothing ranges and footwear.
Primark also lost UK market share in the six months to 21 July, as high street trade suffered.
A better performance elsewhere across Europe, where six-month sales are expected to grow 0.9 per cent, is set to leave Primark’s second half sales down around 0.5 per cent.
AB Foods confirmed that Primark’s underlying earnings are expected to remain on track for the year to 14 September, despite the sales hit in the UK and Ireland.
This comes as it benefits from lower material prices, easing shipping costs and foreign exchange improvements, though it is still facing rising staff wage bills and higher spending on IT and marketing.
The group also expects Primark ‘to deliver good sales growth in 2024-25 as we continue to execute our store rollout programme and our product, digital and brand initiatives’.
But AB Foods warned over next financial year’s profits in its sugar arm, which is being affected by a sharp fall in sugar prices across Europe.
Profitability in the division is lower than expected in the current financial year and AB Foods said this will continue into 2024-25.
It said: ‘We expect the reduction in pricing seen in the fourth quarter of 2023-24 to significantly impact performance in our European sugar business next year, with operating profit for the overall segment now expected to be in the range of £50million to £75million in 2024-25.
‘However, we expect profitability to recover in 2025-26 to be more in line with 2023-24, as a result of the lower beet prices that have been contracted and a rebalancing of supply and demand in the market.’
George Weston, chief executive of AB Foods, added: ‘While the British weather was not in Primark’s favour this summer, robust growth in other markets and new store openings have driven good sales overall.
‘Grocery and ingredients have also grown well in the second half, in line with our expectations, and we will continue to build on this momentum.’
He added: ‘Notwithstanding this short‐term volatility in sugar, we are optimistic about the outlook for the rest of the group.’
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