Shares in Associated British Foods (LON:ABF) plunged after the conglomerate warned Primark’s like-for-like sales are expected to fall 3% in the fourth quarter to 12 September.
For FY26, the group now expects adjusted earnings per share will be ahead of previous expectations. But adjusted operating profit is expected to be broadly in line with forecasts.
The conglomerate plans to spin off Primark next year. And it announced that the discount clothing chain will offer home delivery in the UK.
As CEO George Weston explained: ‘Primark has made significant progress in building its digital capabilities and will continue this through both growing click & collect and by offering home delivery in Great Britain in the future. There is now an opportunity for incremental and profitable growth through this channel.’
Primark sales miss estimates
Primark’s sales are expected to rise around 2% in Q4, supported by new stores and its franchise model. However, like-for-like sales are forecast to decline ‘around 3%’ following recent heatwaves and price cuts.
For FY26, Primark expects sales growth of around 2%, with like-for-like sales down roughly 2.6%. Furthermore, the retailer is still expected to achieve an adjusted operating margin of around 10%.
| Forecast like-for-like sales growth (%) | Q4 FY26 | FY26 |
| UK & Ireland | 0.4% | 0.5% |
| Continental Europe | (4.3)% | (4.7)% |
| Primark (inc franchise revenue) | (3)% | (2.6)% |
Source: Associated British Foods
Q4 trading remained strongest in the UK. Sales are expected to increase by around 1% with like-for-like sales remaining broadly flat.
‘While trading in the quarter started strongly, sales were then impacted by the prolonged hot weather, which delayed the seasonal purchasing catalyst for autumn/weather clothing,’ explained Associated British Foods. ‘Trading was stronger when the weather cooled towards the end of the quarter.’
Consumer confidence remains weak In Continental Europe. Q4 sales are forecast to fall 1% with like-for-like sales down around 4.3%. However, US sales are expected to grow by around 11%.
Sour outlook for sugar
Elsewhere within the group, Grocery sales are expected to grow by mid-single digits in Q4. And Ingredients revenues are anticipated to be up around 10%.
Unfortunately, Associated British Foods reported continued issues for its Sugar division. Adjusted operating losses are now seen coming in at the higher end of the £25 million to £60 million guidance range amid low prices in Europe.
Weston said: ‘Grocery and Ingredients both delivered good growth in the quarter, although the prolonged hot weather in the UK and Europe impacted consumer demand for Twinings tea.
‘While a number of factors contribute to our negative outlook for Sugar in 2027, the recent positive turn in European and global sugar pricing should benefit future years.’
Associated British Foods has long suffered from a ‘conglomerate discount’. This refers to the market’s tendency to value a diversified company at less than the sum of its parts.
So it is encouraging to learn that work on separating Primark from the food businesses is progressing. And completion of the demerger is still expected in December 2027.
And yet, as today’s update confirms, Primark will be striking out alone in a competitive environment. Investments in price, product and marketing have yet to generate meaningful sales growth. So Primark is taking a big leap with its move into home delivery.
Detail is pretty light on when this will actually happen. And as one analyst pointed out: ‘The business’ experience with click & collect and online channels will of course help. Bbut sending products to customers’ doorsteps is a significant economic and logistical challenge, and may take time to implement.’
