LONDON — With luxury flickering back to life, it’s now the high street’s turn to feel the pain of dwindling consumer confidence. The cost-of-living crisis in the U.K., and across Europe, has dented the sales of two fashion retail behemoths, Primark and Marks & Spencer, which have both begun the new year on a down note.
On Thursday, Primark‘s parent Associated British Foods warned that adjusted operating profit and adjusted earnings per share for the 2025-26 fiscal year are expected to be “below” the numbers reported last year, due chiefly to Primark’s under-performance.
ABF said Primark’s sales growth in the 16 weeks to Jan. 3 was below its previous expectations and the company now believes sales growth in the first half of 2026 will be in the low single digits.
The parent said that in a difficult trading environment, Primark “significantly increased markdowns” in order to manage inventory levels effectively, which impacted profitability.
The news sent ABF shares tumbling more than 13 percent to 18.66 pounds in late afternoon trading on the London Stock Exchange.
The Primark at Sawgrass Mills in south Florida.
Courtesy image
In the U.K. Primark delivered sales growth of around 3 percent, with like-for-like sales up 1.7 percent in a “difficult clothing market, particularly over Christmas.”
ABF said the modest growth achieved “was the result of our actions and investments to strengthen our customer value proposition through enhancing our product offer, improving price perception and increasing digital customer engagement, including click and collect. Our womenswear performance was particularly strong.”
The group said that in continental Europe, where similar initiatives to the U.K. “are only recently underway and consumer confidence remains weak, like-for-like sales declined around 5.7 percent in the period.”
It described the retail environment in the U.S. as “volatile, which impacted consumer sentiment and footfall.”
The company said its store roll-out program continued across markets and as expected, and contributed around 4 percent to sales growth in the period, including the first store opening in Kuwait through its franchise model.
Overall, Primark sales rose 1 percent in the 16 weeks, although they were down 2.7 percent on a like-for-like basis.
Looking ahead, ABF said it has a broad range of initiatives in place and planned for the coming months, “which we expect to drive improved sales and profitability, particularly in Europe.”
A look from the Primark 2025 festive campaign.
It warned that if Primark’s current sales trends were to continue in the second half, “we would expect the adjusted operating profit margin for the full year to be approximately 10 percent, similar to the first half, as we continue to invest in growth.”
George Weston, chief executive officer of ABF, said, “Primark has had a challenging start to the financial year, with a mixed performance. In a challenging consumer environment, our focus is on factors within our control. We are also making good progress to deliver Primark’s medium and longer-term growth opportunities.”
He added that ABF’s food businesses, which include brands such as Twinings, Ovaltine, Dorset Cereals, Mazola, and Blue Dragon, experienced mixed trading in the period, particularly in the U.S. where consumer demand in certain categories has continued to weaken.
“While we expect the tough trading conditions to continue in the short term, we remain confident in the overall prospects for the group,” Weston said.
ABF’s fiscal year begins in mid-September, while the fashion-to-food giant plans to report full sales for the 16 weeks to Jan. 3 later this month.
A Marks & Spencer on Oxford Street in central London.
Manuel Valcarce/WWD
Marks & Spencer also witnessed shrinking demand for its clothing during the third fiscal quarter and key holiday trading period.
Fashion, home and beauty sales were down 2.5 percent to 1.27 billion pounds in the 13 weeks to Dec. 27. Underlying sales were down 2.9 percent, with online growth offset by a decline in physical store sales, the company said.
M&S had more clothing stock going into the sales in December, compared with the previous period last year, but said demand had been strong.
The quarterly performance reflected “reduced high street footfall,” as well as the “long tail impact” on stock data and management following a cyberattack last spring, M&S said. The attack, which took place during the long Easter weekend, forced the retail giant to suspend its e-commerce operations for more than six weeks.
M&S group sales were up 24.2 percent to nearly 5 billion pounds due to growth in food, its largest division. The company has maintained its full-year guidance.
Looking ahead, the company said that in the context of an “uncertain” consumer environment it would continue to focus on the end-customer, enhance its value proposition, and pursue its program of physical store transformation and the online experience.
Marks & Spencer holiday 2025 party wear.
In a report following the results, Jefferies had an upbeat take on the results, arguing that M&S was “on the path to recovery.” The bank said that weakness was due partly to larger-than-expected markdowns in December.
Jefferies said the cyberattack disruption “finally has a visible end, and profit before tax delivery is well-underpinned.” The bank added that M&S remains its top stock pick in U.K. retail.
Shares in M&S were up 3 percent at 3.39 pounds in late afternoon trading.
