ABF: Primark owner’s shares sink as sales slow at FTSE 100 giant
Shares in Primark owner Associated British Foods (ABF) have plunged after posting what analysts branded a “mixed bag” of results.
The FTSE 100 warned that challenging conditions were weighing on the company’s trading, listing consumer caution, geopolitical uncertainty and inflation as top factors.
Shares plunged 13 per cent on the news to their lowest value since May.
The group said sales at Primark would rise one per cent in the second half, but on a like-for-like basis expects sales to be two per cent lower year-on-year.
This included a 2.4 per cent drop in quarter three and two per cent in quarter four.
Panmure Liberum analysts Anubhav Malhotra and Wayne Brown kept the stock at a Buy with a target price of 2600p.
“Investor focus today is likely to be on Primark’s weakness in Europe and on Sugar’s full-year profit outlook,” said the analysts.
Mark Crouch, market analyst for investment platform eToro, said: “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. 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. For a business often seen as retail’s early warning signal, the signs don’t look good.”
Crouch said the firm’s womenswear arm had been a “standout performer” and was set to be the “final line of defence”.
Kingsmill and Hovis to create bread giant
In the grocery business, sales were expected to be broadly in line with 2024, whilst operating profit is forecast to dip from previous expectations.
Kingsmill owner Allied Bakeries – one of ABF’s subsidiaries – set out a major deal to acquire peer Hovis early this year in a bid to create a “sustainably profitable business” and drive “significant cost synergies”.
ABF said sales and profits at its Sugar business in the UK and Spain “declined significantly as a result of persistent low European sugar prices and a high cost of beet.”
The firm expects Sugar to post an adjusted operating loss of £40m for the year, but looked towards 2027 for improved financial standing.
ABF said: “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.”
George Weston, chief executive of Associated British Foods, said: “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.
“Primark delivered improved trading in the UK and strong sales growth in the US, while trading on the continent was softer in a weaker consumer environment.
“In our food businesses, overall trading in the second half was in line with our expectations.”