Associated British Foods (ABF) Shares Plunge 9% on Weak Primark Performance in Europe

Key Takeaways

Table of Contents

Q4 like-for-like sales at Primark projected to decline 3%, with continental European markets falling 4.3%
Shares of ABF plummeted more than 9% during early Thursday trading in London
Sugar division adjusted operating loss forecast widened to £70 million to £170 million for 2027
Full-year adjusted earnings per share anticipated to exceed prior forecasts
Primark’s Great Britain home delivery service announced, while planned separation of Retail and Food divisions proceeds toward December 2027 target

Associated British Foods stock plummeted over 9% during Thursday’s early London trading session following a quarterly trading statement indicating Primark’s like-for-like sales are projected to decline 3% in the period concluding September 12.

Shares were changing hands around 1,854p, significantly beneath the 52-week peak of 2,351p.

Associated British Foods plc, ASBFY

The performance weakness was primarily concentrated across continental European markets, which registered a 4.3% LFL sales contraction. While the UK and Ireland delivered a marginal 0.4% increase, this growth proved insufficient to counterbalance the wider European downturn.

Analysts at Jefferies offered a blunt assessment, characterizing the performance as “a muted end to the year for Primark led by underwhelming Europe sales” and labeling the company’s forward guidance as “a downbeat outlook for the stock this morning.”

Notwithstanding the LFL contraction, Primark’s overall sales are anticipated to expand approximately 2% across the full fiscal year. Store expansion initiatives and the franchise business model delivered roughly 5% to overall growth. Primark’s adjusted operating margin is still projected to reach approximately 10%.

The U.S. market delivered positive momentum. Revenue increased approximately 11% during the quarter as Primark’s American footprint expanded to 47 locations nationwide. Franchise operations throughout the Gulf region also demonstrated robust performance, with expansion initiatives planned for Saudi Arabia and Mexico.

Food Division Compounds Challenges

Across the Food division, Grocery adjusted operating profit is anticipated to fall marginally short of earlier projections. Subdued consumer demand for Twinings tea products, attributed to an unusually prolonged period of warm weather, was identified as the principal factor.

The Sugar segment is now tracking toward the upper boundary of its £25 million to £60 million adjusted operating loss projection for 2026, driven by elevated natural gas expenses and depressed European sugar market prices. The Ingredients division’s profit is anticipated to align with previous forecasts.

Extending the outlook window, ABF provided preliminary guidance for 2027 that struck a cautious tone. The Sugar division’s adjusted operating loss is projected at £70 million to £170 million, representing a considerably broader range that accounts for potential headwinds including elevated gas costs and adverse weather conditions affecting African operations.

Grocery profitability is forecast to edge slightly above 2026 levels, notwithstanding a one-time impact associated with consolidating the recently acquired Hovis business. The Agriculture division’s profit is expected to show year-over-year improvement.

Broader Market Context

ABF’s stock wasn’t alone in facing selling pressure Thursday. The FTSE 100 index dropped to its lowest level in seven weeks as intensifying tensions between the United States and Iran pushed Brent crude pricing above $100 per barrel, creating broader market headwinds that compounded ABF’s company-specific challenges.

Full-year adjusted earnings per share is now forecast to surpass earlier guidance, providing a modest counterbalance to the otherwise pessimistic update.

The company officially confirmed plans to roll out Primark home delivery services throughout Great Britain, supported by a recently acquired automated fulfillment center in Sheffield.

The anticipated separation of the Retail business from the Food division continues to progress according to schedule, with completion targeted for December 2027.

Complete annual results are slated for release on November 3.

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