- Primark like-for-likes still negative
- Grocery profit below expectations
- Sugar earnings recovery delayed
Associated British Foods (ABF) was the biggest FTSE 100 faller on 10 September, shares in the food-to-fashion combine plunging as much as 300p or 13% to £19.42 on news of another period of negative like-for-like sales at discount fashion chain Primark and the absence of guidance on the chain for the year ahead.
Investors were also spooked as Associated British Foods warned second-half operating profit in its agriculture division would be ‘significantly below’ last year.
Furthermore, second-half operating profit in the grocery business is now expected to come in ‘slightly below’ previous expectations due to one-off restructuring costs.
GROWTH SLOWDOWN
Cut-price clothing retailer Primark delivered improved trading in the UK in the second half of the year ending 13 September 2025 as well as strong sales growth in the US, but softer-than-expected trading in Europe means total like-for-like sales are expected to be 2% down year-on-year.
‘Our trading in the UK and Ireland was a good sequential improvement on H1 reflecting our strong product offer, particularly in womenswear, and increased digital engagement, supported by more favourable market conditions,’ explained Associated British Foods.
‘We saw a more subdued consumer environment in Europe and trading was weaker, while performance in the US was strong. Looking ahead, we currently expect the consumer environment to remain uncertain.’
SUGAR REMAINS A BITTER PILL
For full-year 2025, Associated British Foods’ sugar business including the Vivergo bioethanol plant is set to record a near-£40 million operating loss.
And while ‘some improvement’ in sugar profitability is expected in full-year 2026, the company warned sugar prices ‘remain below our previous expectations’, which will delay the recovery in sugar profitability.
‘This has also been a busy period strategically, including the decision to close the Vivergo bioethanol plant, the restructuring of our Spanish sugar business, and an agreement for Allied Bakeries to acquire Hovis to create a financially sustainable UK bakeries business,’ commented CEO George Weston.
‘Against a backdrop of continued volatility in 2026, we will start to see the benefit from our recent actions and continued investment,’ he insisted.
MIXED BAG
Begbies Traynor’s (BEG:AIM) Julie Palmer said that after a disappointing first half, today’s update from ABF shows progress in some areas, but the wider picture remains mixed.
‘Operating margins remain a thorn in Associated British Foods’ side, with grocery and sugar weighing on performance despite some resilience in ingredients. The Hovis acquisition could bring greater stability to the bakery arm, but ongoing restructuring costs remain a drag,’ said Palmer.
‘Investors may well be asking why Primark isn’t performing better at a time when value is supposed to be king, but should take some comfort from international momentum, particularly in the US. Associated British Foods still has strategic levers to pull, but the need to steady its core UK business remains clear.’
Russ Mould, investment director at AJ Bell, commented: ‘The idea that value retailers will automatically thrive in a period where consumers are watching their pennies no longer stacks up. Cheap prices do not mean goods will fly off the shelf, just as Primark has found out. Sales have been poor in parts of Europe amid a weaker consumer environment. While there are green shoots in the UK, even its domestic territory isn’t firing on all cylinders.’
Mould added: ‘In the current environment, all Primark can do is make sure its stores are tidy, there is good stock availability, and pricing remains competitive. It’s a case of sitting tight and waiting for market conditions to improve.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Ian Conway) own shares in AJ Bell.
