AB Foods cuts profit forecast on Primark discounting, US weakness

By Yadarisa Shabong

Jan 8 (Reuters) – AB Foods warned annual profit would fall as heavy discounting at its Primark fashion business and weaker U.S. demand – especially among Hispanic shoppers – hit ‍food ingredient sales, driving its shares as much as 12% lower.

Thursday’s profit warning underscores mounting pressure on retailers and food makers as European consumers tighten spending and economic anxiety weighs on some U.S. customers.

Muted U.S. consumer demand, notably among Hispanic customers, has weighed on AB Foods’ grocery ‌business “following everything that’s been happening from April onwards,” ‌acting Finance Director Joana Edwards told analysts.

Anti-immigration raids championed by U.S. President Donald Trump have affected the Hispanic population in the U.S., prompting some to switch to online shopping.

Constellation Brands, the U.S. importer of Modelo ​and Corona beer brands, has also reported weaker consumer sentiment recently, particularly among Hispanics.

PRIMARK DISCOUNTING SQUEEZES MARGINS

Like-for-like sales at Primark dropped ‍2.7% in the 16 weeks to ​January 3, below forecasts, AB Foods said. Growth in ​the UK was offset by weakness in Europe and a “volatile” U.S. ‍retail environment that dented sentiment and footfall.

AB Foods said heavy discounting at Primark to clear stock in a tough demand backdrop had squeezed margins.

“We expect the tough trading conditions to continue in the short term,” said CEO George Weston in a statement, ‍adding that plans were in place to lift performance in Europe.

The British company now sees group adjusted operating profit and earnings per share below ‍last year’s levels. ‍It had previously forecast earnings growth for 2026.

The ​company, whose food business makes products from sugar ​to bakery ⁠ingredients, has been weighing a spin-off of Primark ‌after reporting a drop in full-year profit in November.

On Thursday, it kept its outlook for sugar and agriculture but cut forecasts for grocery and ingredients, citing unexpectedly sharp weakness in U.S. demand for cooking oils and bakery ingredients.

(Reporting by Yadarisa Shabong in Bengaluru. Editing by Subhranshu Sahu ⁠and Mark Potter)