Associated British Foods (AB Foods) has reduced its annual sales outlook for Primark, its budget clothing division, following weaker-than-expected performance in the Christmas quarter in its

key UK and Ireland markets.

The company now expects "low-single-digit" sales growth for Primark in 2025, down from its previous forecast of "mid-single-digit" growth. Despite this adjustment, it maintained its projection for an adjusted operating margin in line with the 11.7% achieved in the 2023/24 fiscal year.

In its fiscal first quarter, which ended on January 4, Primark's total sales increased by 2%, bolstered by the opening of new stores. However, like-for-like sales, which exclude the impact of new stores, declined by 1.9%. This drop included a 6% decrease in the UK and Ireland, which together account for around 45% of Primark's total sales.

The company's stock initially dropped 2% following the news but later recovered to trade flat at 1,933 pence.

Primark attributed the decline in UK and Ireland sales to weaker trading during the autumn months, which offset growth during the critical Christmas shopping period. A mild autumn, combined with cautious consumer sentiment, reduced the demand for seasonal purchases, according to the company.

"Elements of our shopper base showed weak trading activity due to cautious consumer behavior and a lack of seasonal purchasing catalysts," the company stated.

This follows a trend seen by other retailers targeting lower-income consumers. Earlier this month, JD Sports, Argos, Greggs, and Poundland also reported subdued Christmas trading. Meanwhile, clothing retailers Next and Marks & Spencer bucked the trend with positive holiday sales, although Next highlighted weaker performance in physical stores compared to online.

Unlike many of its competitors, Primark does not offer online delivery but does provide a click-and-collect service.

While Primark's performance has been underwhelming, AB Foods maintained its overall guidance for its other business divisions, including grocery, sugar, agriculture, and ingredients.

In the first quarter, revenue in AB Foods' grocery business—which includes brands such as Twinings tea, Jordans cereals, Kingsmill bread, and Ovaltine—grew by 1%. However, sugar sales declined by 2%.

Shares in AB Foods have dropped 14% over the past year. Photo by Oxyman, Wikimedia commons.