Associated British Foods has taken a £206mn impairment charge against Primark’s operations in Germany, reflecting a long period of weak performance in Europe’s largest economy.
It said store profitability had fallen to “an unacceptably low level” because of a combination of large stores, declining sales densities and high wage costs. Store sales have not recovered to pre-pandemic levels.
“We remain committed to our loyal customers in this important market and we are now reviewing options to return our business in Germany to long-term profitability,” ABF said in its full-year results statement on Tuesday.
Options included closing or downsizing stores, it added.
Primark sales in several other European markets remained weak, though the UK and Ireland had broadly returned to pre-Covid levels.
Revenue of £7.7bn for the year to September 17 was 38 per cent higher than last year, while adjusted operating profit more than doubled to £756mn, reflecting the absence of lockdowns in the year.
Group sales rose 22 per cent to almost £17bn while adjusted operating profit was £1.4bn, in line with estimates. There was no change to the forecasts for the current year made in late September.