Associated British Foods has reported a 12% decline in Primark’s adjusted operating profit at constant currency, with weaker sales at existing stores and increased investment in pricing and marketing weighing on the fashion retailer’s annual performance.
Primark generated £1.005bn in adjusted operating profit for the year ended 12 September 2026, down 11% at reported exchange rates. Its adjusted operating margin declined from 11.9% to 10.2%, while revenue increased to £9.82bn, representing growth of 4% at reported exchange rates and 2% at constant currency.
New stores and franchise operations contributed approximately five percentage points to sales growth, offsetting a 2.6% decline in like-for-like sales across the retailer’s existing operations. The contrast shows that expansion continued to support revenue even as established stores struggled to increase sales.
The performance varied considerably between markets. UK like-for-like sales increased 0.5% over the year, with Primark gaining market share after investing in its product range, marketing and pricing. The improvement was concentrated in the first half, however, with comparable UK sales declining 0.2% during the second half.
Continental Europe presented a more difficult trading environment. Like-for-like sales fell 4.7%, reflecting weaker consumer demand and a commercial recovery programme that remains at an earlier stage than the initiatives implemented in Britain. Europe accounted for approximately 47% of Primark’s annual sales, making its performance particularly important to the group’s profitability.
Management has identified the UK market and womenswear as areas where changes to product development, value perception and marketing have produced better results. The company intends to extend those improvements across continental Europe and other product categories during 2027.
Investment in the customer proposition has contributed to short-term pressure on profitability. Lower prices and promotional activity can affect the gross margin earned on products, while marketing and digital development add operating costs before the corresponding sales improvements are fully realised. Lower like-for-like sales also contributed to increased markdowns during the year.
Primark is continuing to develop its digital capabilities alongside its physical store network. Click & Collect is expanding, and the retailer plans to introduce home delivery in Great Britain. That intention was disclosed in September and remains part of the wider programme to reach customers who cannot conveniently visit a store.
For the 2027 financial year, management expects new selling space in Europe, the United States and franchise markets to add approximately 4% to sales growth. The adjusted operating margin is forecast to remain around 10%, reflecting continued spending on measures intended to improve sales from existing stores.
The forecasts come as Associated British Foods prepares to separate Primark from its food operations. The demerger, approved as the preferred direction following a group structure review in April, is expected to be completed in December 2027. Separate investor presentations are planned as the two businesses prepare for independent operations.
The proposed separation will leave Primark as a standalone fashion retailer while the remaining food business operates under the AB Foods identity. Management expects some additional costs associated with preparing Primark for independence, which are not included in its current retail margin guidance.
Across Associated British Foods, adjusted operating profit fell 14% at constant currency to £1.508bn. Sugar reported an adjusted operating loss of £47m, while Grocery and Ingredients also generated lower profits. The company expects further pressure in 2027, principally because its sugar business could record an adjusted operating loss between £70m and £170m.
The group generated £652m in free cash flow, completed £253m of share buybacks and maintained its annual dividend at 63.0p per share. Those shareholder returns accompany continued investment in the businesses preparing for separation.
For Primark, the results establish the financial challenge accompanying its proposed independence. Its store network continues to expand, but management’s investment programme must improve performance at existing locations while the company maintains its value positioning and prepares to operate separately from AB Foods.
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