ABF shares plunge as Primark sales fall short of expectations
- Associated British Foods reported disappointing sales forecasts for Primark, leading to a significant drop in share price.
- Primark expects a 1% increase in sales for the second half of the year but a 2% decline on a like-for-like basis year-over-year.
- The situation raises concerns about the company's ability to navigate a challenging consumer landscape, particularly in Europe.
In Europe, particularly in the UK and Ireland, Associated British Foods (ABF) has witnessed significant challenges within its retail division, Primark. The company's shares fell approximately 10% after it reported that Primark's sales did not meet analysts' forecasts. The latest earnings report indicated that sales at Primark are expected to rise by only 1% in the latter half of the year, with like-for-like sales projected to decrease by 2% year-over-year. This decline includes a 2.4% drop in quarter three and roughly a 2% decrease in quarter four. The chief executive of ABF, George Weston, expressed some satisfaction with the group's performance amid what he described as a difficult market environment beset by consumer caution, geopolitical uncertainties, and inflation. While sales in the UK and Ireland grew from the first half of the year due to strong womenswear and increased digital engagement, the company faces sluggish trading conditions in Europe. ABF's situation is further complicated by issues in its other divisions, particularly grocery revenues remaining flat year-over-year and significant declines in the sugar segment. The company anticipates that its total Sugar segment may incur an adjusted operating loss of £40 million for the full year. Despite these challenges, ABF's acquisition of Hovis Group was viewed strategically as a move to bolster its breadmaking operations. Analysts, however, remain concerned about slower sales growth and the potential long-term impacts of a more cautious consumer landscape across Europe.