Shares in food and clothing conglomerate Associated British Foods tanked on Wednesday, as sales at the key Primark retail division undershot forecasts.
At £20.23 per share, the ABF share price was last 9.7% lower in midweek business.
At its Primark budget clothing division, the FTSE 100 company said sales are expected to rise 1% in the second half. Growth is tipped to be evenly distributed across the third and fourth quarters.
However, on a like-for-like basis, ABF expects sales to be 2% lower year on year, dropping 2.4% in quarter three and around 2% in quarter four.
ABF said that UK and Irish sales have grown from the first half, which it attributed to “our strong product offer, particularly in womenswear, and increased digital engagement, supported by more favourable market conditions.”
The company also described trading in the US as “strong.” But it added that “we saw a more subdued consumer environment in Europe and trading was weaker.”
For the full year, Primark’s total sales are tipped to rise 1% year on year, with the retailer’s store rollout programme expected to drive sales growth of roughly 4%.
Trouble Elsewhere
Elsewhere, ABF said Grocery revenues are expected to be unchanged in the second half from the prior year. It said that this reflects “good growth in our international brands, offset by lower sales in Allied Bakeries and US oils.”
However, it said second-half adjusted operating profit is likely to be lower than forecasts chiefly due to one-off restructuring costs.
Ingredients sales are also tipped to be flat year on year. ABF said that its yeast and bakery ingredients business continued to enjoy “good underlying growth in most markets.”
However, currency devaluation and lower inflation in Argentina took a bite out of sales.
At Sugar, ABF said sales and profits in the UK and Spain “declined significantly as a result of persistent low European sugar prices and a high cost of beet.”
For the full year, it expects Sugar to record an adjusted operating loss of £40m, though it said Sugar profits will improve in financial 2027.
It added that “whilst we will benefit from having contracted lower beet prices in Europe, sugar prices remain below our previous expectations and will delay the recovery in Sugar profitability.”
Recent Actions Underpin Confidence
Chief executive George Weston commented that “I’m pleased with how the Group has performed in the second half of our financial year in what continues to be a challenging environment, characterised by consumer caution, geopolitical uncertainty and inflation.”
Pointing to recent strategic decisions, he added that “against a backdrop of continued volatility in 2026, we will start to see the benefit from our recent actions and continued investment.”
Such measures include restructuring of its Spanish sugar business and closure of its Vivergo bioethanol plant in the UK, and the acquisition of Hovis Group last month to boost its breadmaking operations.
Question Time
Analyst Mark Crouch of eToro commented “Primark has long been the jewel in ABF’s crown, a retailer that’s thrived on value, volume, and an uncanny knack for reading the consumer mood. But today’s update raises more questions than it answers.”
He noted that “sales growth is slowing in Europe, flat in the UK, and while the US is picking up pace, it’s still not enough to counterbalance weakness elsewhere.”
Looking elsewhere, Crouch said that “the surprise Hovis deal could give the group a much-needed lift [as] the pivot deeper into bakery makes strategic sense. It’s less exposed to commodity swings, and with potential for scale-driven margin gains and stronger pricing power, that’s something ABF needs now more than ever.”