Key Highlights
- Primark’s comparable sales projected to decline 3% in the fourth quarter, with continental Europe declining 4.3%
- Associated British Foods shares plummeted over 9% during early Thursday trading in London
- Sugar division’s adjusted operating loss for fiscal 2027 forecast between Ā£70 million and Ā£170 million
- Full-year adjusted earnings per share now anticipated to exceed previous forecasts
- Primark launching home delivery service in Great Britain, while Retail-Food demerger remains scheduled for December 2027
Associated British Foods stock experienced a sharp decline exceeding 9% during Thursday’s early London trading session following a quarterly trading report revealing Primark’s like-for-like sales are projected to decrease 3% for the period concluding September 12.
Shares were changing hands at approximately 1,854p, significantly beneath the 52-week peak of 2,351p.
Associated British Foods plc, ASBFY
The deterioration was primarily centered in continental European markets, where comparable sales tumbled 4.3%. While the UK and Ireland recorded a slight 0.4% increase, this gain proved insufficient to counterbalance the wider challenges.
Analysts at Jefferies offered a candid assessment, characterizing the performance as “a muted end to the year for Primark led by underwhelming Europe sales” while describing the company’s forward guidance as “a downbeat outlook for the stock this morning.”
Notwithstanding the comparable sales contraction, Primark’s overall revenue is still projected to advance approximately 2% for the complete fiscal year. Store expansion initiatives and the franchise business model delivered roughly 5% to overall growth. The adjusted operating margin for Primark is still anticipated to reach around 10%.
The American market provided a notable exception to the weakness. Revenue climbed approximately 11% during the quarter as Primark’s footprint expanded to 47 locations nationwide. Franchise operations throughout the Gulf region also delivered robust results, with expansion initiatives planned for Saudi Arabia and Mexico.
Food Division Compounds Challenges
Across the Food segment, Grocery’s adjusted operating profit is anticipated to fall marginally short of earlier projections. Softer consumer demand for Twinings tea products, attributed to a prolonged period of elevated temperatures, was identified as the principal headwind.
The Sugar division is now tracking toward the upper boundary of its Ā£25 million to Ā£60 million adjusted operating loss projection for 2026, driven by elevated natural gas expenses and depressed European sugar pricing. Ingredients profitability is expected to align with previous estimates.
Regarding 2027 outlook, ABF provided a conservative preliminary assessment. The Sugar division’s adjusted operating loss is forecast at Ā£70 million to Ā£170 million, representing a substantially broader range, reflecting potential risks including elevated gas costs and climate-related impacts across African operations.
Grocery profitability is anticipated to edge slightly above 2026 levels, notwithstanding a one-time impact from integrating the recently purchased Hovis business. Agriculture segment profit is expected to show year-over-year improvement.
Broader Market Environment
ABF’s stock wasn’t alone facing headwinds on Thursday. The FTSE 100 declined to a seven-week trough as intensifying tensions between the U.S. and Iran drove Brent crude past $100 per barrel, creating additional macroeconomic pressure alongside ABF’s company-specific challenges.
Full-year adjusted earnings per share is now projected to surpass earlier guidance, providing a modest counterweight to the otherwise pessimistic tone.
Management confirmed plans to introduce Primark’s home delivery service throughout Great Britain, supported by a recently acquired automated distribution center in Sheffield.
The anticipated separation of the Retail operations from the Food division continues progressing toward its scheduled completion in December 2027.
Comprehensive annual results are slated for release on November 3.
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