Lower sales at Penneys weighs on owners profits 

Penneys is owned by British firm Associated British Foods. Dublin.Photo:Leah Farrell/RollingNews.ie

Penneys-owner Associated British Foods has forecast another profit decline this year after reporting a 14% fall in its previous financial year as deeper sugar losses and lower underlying sales at its Primark fashion chain weighed on earnings.

The FTSE 100 group, which confirmed in April it would demerge Primark (Penneys in Ireland) from its food businesses next year, made adjusted operating profit of £1.508bn ($1.8bn) for its year to September 12, 2026, on group revenue down 1% on a constant currency basis to £19.58bn.

"In 2027, the Group is expected to deliver adjusted operating profit and adjusted earnings per share below 2026, mainly due to Sugar, as previously guided," the group, which also owns grocery, ingredients and agriculture businesses, said.

It said it remained cautious on consumer sentiment and also the impact of inflation and higher energy costs on its businesses.

AB Foods said work on the demerger is progressing well and is expected to be completed in December 2027. Its shares are down 15% over the last year.

In the 2025/26 year, Primark's adjusted operating profit fell 12% to £1bn, as like-for-like sales fell 2.6%, while grocery profit declined 11%, mainly due to lower profit from US oils.

Sugar losses widened to £47 million, mainly due to lower average selling prices in Europe. They are expected to deepen in a range of £70 million to £170 million in 2026/2027.

For 2026/27, the group also expects Primark's adjusted operating margin to be approximately 10% versus 10.2% in 2025/26. It expects space growth in Europe, the US and franchise markets to contribute around 4% to sales growth.

Profit in the grocery division, which includes brands such as Twinings, Ovaltine, Ryvita and Jordans, is expected to be broadly in line with 2025/26.

Reuters