Shares in Primark owner Associated British Foods (ABF) slumped by 10% on Monday after it said full-year sales at the retail chain have taken a hit from unseasonable weather, with the group's pension scheme also falling into deficit.
ABF said that like-for-like sales at Primark are expected to fall by 2% over the year as warm pre-Christmas weather and a "very cold" March and April dampened its performance.
However, the fashion chain still expects overall annual sales to be 9% ahead of last year, driven by a 9% increase in selling space, which saw a net addition of 22 stores, bringing the estate up to 315 shops.
ABF said that the collapse in sterling against the dollar since the Brexit vote will have "no effect" on Primark this year because of the firm's practice of taking out forward currency contracts. However, it warned that its margins will be squeezed as a result of a weaker pound.
"The transactional impact on Primark's margins from the weakening of sterling against the US dollar, particularly since the EU referendum, will have no effect in this financial year as a result of our practice of taking out forward currency contracts when garment purchase orders are placed.
"However, at current exchange rates, margin will be adversely affected in the new financial year," it said.
The group also revealed that its pension scheme will fall into a £200 million deficit, compared with last year's surplus, following a "marked decline in UK long-term bond yields".
Since Britain voted to leave the EU, the country's pension deficit has swelled and now stands at more than £400 billion.
Neil Wilson, m arkets analyst at ETX Capital, said: "The pension deficit is a concern. The company's pension scheme has swung from being in surplus last year to a deficit of £200 million today.
"That chimes with what we're seeing elsewhere as record low bond yields are wreaking havoc with company pensions."
ABF added that, as a result of the weaker pound, there would be a favourable effect on profit margins at its sugar operations and on profits earned outside the UK.
The firm, which also owns Twinings tea and Kingsmill bread, said that across its businesses it expects group operating profit to be ahead of last year, partly due to the weakness of sterling.