Retail giant blames cautious spending and mild weather for disappointing Christmas sales.

Primark‘s parent company, Associated British Foods (ABF), has slashed its annual sales forecast after a disappointing Christmas trading period. The retailer, long considered a key performer for ABF, saw sales fall short of expectations, particularly in the UK and Ireland. In response, Primark has downgraded its growth forecast for 2025 to ‘low single-digit’ growth, down from the previously projected ‘mid single-digit’ growth.

ABF’s retail division, primarily consisting of Primark stores, saw a modest 0.4% decline in sales, amounting to £3.36 billion for the 16 weeks ending 4 January. While this was a slight increase of 1.9% on a constant currency basis, the UK and Ireland market performed poorly, with sales dropping by 4% and like-for-like sales falling by 6%. This underperformance has raised concerns about Primark’s future growth in its core markets, especially as the retail giant faces rising costs due to national insurance contributions and minimum wage increases set to take effect in April.

Primark’s struggles over the festive period can be attributed to both a more cautious consumer spending pattern and unfavourable weather conditions. The retailer noted that the mild autumn weather hurt sales of winter staples like coats and jackets during October and November. Despite these setbacks, Primark found stronger growth in markets outside the UK, with Spain, Portugal, France, Italy, and the US performing better than expected.

Dan Lane, a lead analyst at Robinhood UK, remarked that while Primark had long been a standout performer for ABF, its shine is beginning to dull. “Primark is losing its lustre quickly,” Lane stated. He pointed to the ongoing challenge of a subdued retail environment in the UK, coupled with rising costs, as key factors weighing on the company’s prospects.

Primark’s struggles come as the UK retail sector faces growing pressure from both economic headwinds and fierce competition. Analysts suggest that slowing growth in disposable incomes, particularly among lower-income households, could disproportionately affect Primark. Given that 85% of the retailer’s products are priced below £10, the UK market generates nearly 50% of Primark’s revenue, making it highly sensitive to changes in consumer sentiment.

In addition to rising costs, Primark’s inability to establish a transactional online platform has also put it at a disadvantage. While the company insists that in-store shopping is more profitable, many consumers have turned to online platforms like Shein for cheaper alternatives. The growing popularity of second-hand shopping platforms, such as Vinted, further intensifies the competition.

Richard Hunter, head of markets at Interactive Investor, highlighted that Primark’s cautious outlook for 2025 is a direct result of a sluggish retail environment, exacerbated by the government’s tax changes. “Cautious consumer sentiment is already beginning to weigh on prospects,” Hunter said, adding that ABF’s stock had underperformed over the past year, falling 15%, compared to the FTSE 100’s 14% gain.

Despite these challenges, ABF remains optimistic about Primark’s international expansion, with strong performances in markets like the US and parts of Europe. However, analysts warn that without a significant shift in its UK operations or a shift towards e-commerce, Primark’s long-term prospects could remain uncertain.

In its broader operations, ABF also reported a decline in total sales across its other divisions. The grocery arm, which includes brands like Ryvita and Twinings, saw a 1.8% drop in sales, while its sugar division was hit hardest by falling sugar prices in Europe. Shares of ABF slipped 0.36%, continuing a downward trend seen throughout the past year