Penneys-owner posts 12% drop in profit following decline in sugar business 

Penneys/Primark is owned by Associated British Foods. 

Despite growth in its retail division, Penney’s-owner Associated British Foods (ABF) has posted a 12% decline in operating profit for the first half of its financial year largely due to declines in its sugar business, the company’s interim results show.

In the 24 weeks up to March 1, the company reported revenue in line with prior year, with growth in its retail and ingredients divisions offset by a decline in its sugar division.

Adjusted operating profit stood at £835m (€975.8m ) during this period down from £951m in the same period last year. This would be a 10% decline on a constant currency basis.

The interim results show that in its retail division, which mostly comprises its Penneys/Primark business, sales grew by 1% year-on-year to £4.5bn. Adjusted operating profit in this area increased 8% to £540m.

The growth was seen in Europe and the US, while the retail environment in the UK and Ireland was “challenging”, the company said.

ABF’s ingredients business grew by 2% with adjusted operating profit up 8%.

However, its sugar division had an adjusted operating loss of £16m, primarily due to lower European sugar prices and an operating loss in Vivergo, its bio-ethanol producing firm. The company cited “persistent low European sugar prices” for the loss.

George Weston, chief executive of ABF, said the results reflect a “robust performance” across four of its five divisions but he is “frustrated” with the results in its sugar division.

“We are clear on what needs to be done by way of operational and regulatory solutions to improve financial performance.”

On Penneys/Primark, Mr Weston said the company’s profit and margin delivery was “strong and our low-cost operating model is working well”.

“Our focus remains on sharp execution of our key growth initiatives across product, brand, digital and new market entry,” he said.

Last month, Penneys was rocked by the sudden resignation of Paul Merchant, the company’s chief executive after an allegation over his behaviour towards a woman.

ABF said the company’s outlook for the year remains unchanged with the exception of its sugar division which it now expects to see a loss of £40m during this financial year.

“In Penneys/Primark, we continue to target low-single digit sales growth for the full year. This will be driven by our store rollout programme in our growth markets in Europe and the US, which is on track to contribute around 4% to total Primark sales growth, offset by weaker sales in the UK and Ireland,” the company said.

“We continue to expect adjusted operating profit margin in 2025 to be broadly in line with last year's level.” 

The outlook “reflects the absorption of a US tariff impact” in the second half of this year.