Associated British Foods (AB Foods) has issued a profit warning, blaming heavy discounting at its Primark fashion chain and weak US demand for food ingredients. Shares fell as much as 12% after the company said it now expects group adjusted operating profit and earnings per share to be below last year's levels.
Like-for-like sales at Primark dropped 2.7% in the 16 weeks to January 3, falling short of forecasts. While the UK market saw growth, weakness in Europe and a volatile US retail environment weighed on performance. The company cut prices to clear stock, squeezing margins.
CEO George Weston said: 'We expect the tough trading conditions to continue in the short term.' AB Foods also cut forecasts for its grocery and ingredients divisions, citing unexpectedly sharp weakness in US demand for cooking oils and bakery ingredients. Acting finance director Joana Edwards noted muted consumer sentiment among Hispanic customers, linked to US anti-immigration raids.
Meanwhile, the UK Competition and Markets Authority (CMA) has agreed to fast-track its probe into AB Foods' acquisition of bread brand Hovis to an in-depth investigation. AB Foods already owns Kingsmill, Allinson's, and Sunblest. A spokesperson said the company is pleased to move quickly to demonstrate the deal's benefits.
