Associated British Foods (ABF) has seen its share price drop by over 11% after warning that its operating profit and earnings per share are set to be below last year’s figures.

In its trading update for the 16 weeks to 3 January, its Primark brand delivered "encouraging sales growth" of around 3% year-on-year, as a result of the firm's actions and investments to strengthen its customer value proposition.

However, its continental division saw its sales drop by around 5.7%, with Primark’s overall sales growth being below previous expectations.

As a result, ABF expects Primark’s sales growth in the first half of 2026 to be in the single low digits. It added that in a "difficult trading environment", it has significantly increased markdowns to manage inventory levels effectively, which has impacted profitability.

ABF, which also owns brands including Twinings, Silver Spoon and Kingsmill, stated that its food businesses had experienced mixed trading in the first quarter of its financial year.

It said in the US, it had expected ongoing consumer weakness to lead to lower sales, and this has been more acute in its cooking oils and bakery ingredients businesses this year. As a result, it has been more cautious in its outlook and therefore expects both its grocery and ingredients segments to deliver an operating profit that is “moderately below” last year’s results.

In its sugar and agriculture segments, there is no change to its guidance outlined in November.

Chief executive at ABF, George Weston, concluded: "Primark has had a challenging start to the financial year, with a mixed performance. In the UK, focused actions and investments to strengthen our customer proposition have driven improved trading and market share gains, while trading has remained weak in continental Europe.

"In a challenging consumer environment, our focus is on factors within our control, including initiatives now underway in Europe aimed at improving performance. We are also making good progress to deliver Primark's medium and longer-term growth opportunities.

"Our food businesses experienced mixed trading in the period, particularly in the US where consumer demand in certain categories has continued to weaken. While we expect the tough trading conditions to continue in the short term, we remain confident in the overall prospects for the group."

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