Ouch! Shares in Associated British Foods have dropped by over 10% after it startled the City with a profit warning at 7am.

ABF told shareholders this morning that sales growth at its Primark chain were below expections in the last 16 weeks, and that the discount clothing chain struggled in Europe and in the US.

In another blow, ABF’s food and ingredients business had “experienced mixed trading”, with sales falling more than expected in the US.

The company now expects its adjusted operating profit and adjusted earnings-per-share to be lower than last year.

In the UK, Primark’s like-for-like sales grew by 1.7% in “a difficult clothing market, particularly over Christmas”, the company says, pointing to initiatives such as “enhancing our product offer, improving price perception and increasing digital customer engagement”.

But in continental Europe, where such initiatives to the UK only recently began, like-for-like sales declined around 5.7% in the period.

George Weston, chief executive of Associated British Foods, says:

“Primark has had a challenging start to the financial year, with a mixed performance. In the UK, focused actions and investments to strengthen our customer proposition have driven improved trading and market share gains, while trading has remained weak in continental Europe.

In a challenging consumer environment, our focus is on factors within our control, including initiatives now underway in Europe aimed at improving performance. We are also making good progress to deliver Primark’s medium and longer-term growth opportunities.

Our food businesses experienced mixed trading in the period, particularly in the US 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.”