Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: “Associated British Foods’ results were a touch soft, but news of a potential spin-off of its beloved Primark and Food businesses grabbed headlines on the day.
“In the UK, Ireland and Europe, Primark’s like-for-like sales declined over the year, despite the favourable summer weather.
“Instead, growth was driven by its store rollout programme, with a particularly strong performance in the US, helping total Primark sales edge 1 per cent higher over the year.
“At a time when many other large physical retailers are closing their doors, Primark expects new stores to contribute around 4-5 per cent in annual sales growth for the foreseeable future.
“Primark’s not the only show in town, though. ABF is home to an eclectic mix of food and commodity businesses.
“A sharp fall in European sugar prices saw underlying operating profits in the Sugar division melt away from £213 million in the prior year to a £2 million decline in 2025.
“As a result of the challenges, the group announced it is reviewing its group structure, with a potential spin-off of Primark and the Food businesses on the cards.
“This would likely be beneficial to the valuation in the long run but given the current cyclical challenges at Primark and the Food businesses, it’s unlikely to happen in the next year.
“The balance sheet remains in decent shape though and should help ABF to weather the storm until sugar prices pick back up.
“As with any cyclical business, it’s not clear yet how long that’ll take, and things could get worse before they get better.
“That’s weighing on the group’s valuation, which is sitting well below the long-run average on a price-to-earnings basis.
“That could mark an attractive entry point, but potential investors will need plenty of patience.”
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