Associated British Foods plc stock faces pressure amid Primark sales slowdown and grocery margin squeeze

Associated British Foods plc (ISIN: GB0006731235) reports softer Primark like-for-like sales and narrowing grocery margins in its half-year update, prompting investor caution. The stock dipped on the London Stock Exchange in GBP terms. DACH investors eye the FTSE 100 stalwart's resilience in a high-cost environment. (ISIN: GB0006731235)

Associated British Foods plc released its interim results for the 26 weeks ended 27 December 2025, revealing challenges across its key segments. Primark like-for-like sales growth slowed to 0.7%, hit by cautious consumer spending in the UK and currency headwinds in Europe. Grocery margins contracted due to elevated input costs and competitive pricing. The stock fell 2.1% to 2,215 pence on the London Stock Exchange in GBP on the results day. For DACH investors, this underscores risks in UK consumer exposure while highlighting diversification benefits versus pure domestic plays.

As of: 22.03.2026

By Eleanor Hargrove, Senior Consumer Goods Analyst – Tracking multinational food and retail giants like Associated British Foods plc amid shifting European demand patterns and cost pressures.

Half-Year Results Highlight Segment Pressures

The group posted adjusted operating profit of £951 million, down 5% from last year. Revenue held steady at £8.4 billion. Primark drove 61% of profits but saw sales growth decelerate to 1.9% on a constant currency basis. UK like-for-like sales dropped 1.3%, reflecting weaker apparel demand.

Grocery delivered £429 million in profit, a 3% decline, as sugar prices rose and wheat costs remained high. Ingredients trading profit fell 18% to £62 million amid volatile commodity markets. Agriculture profit slipped to £81 million from lower UK production.

Free cash flow strengthened to £1.1 billion, supporting a progressive dividend policy. Net debt stood at £1.4 billion, with gearing at a comfortable 14%. Management expressed confidence in full-year guidance despite macro headwinds.

Investors reacted to the mixed picture, with the share price on the London Stock Exchange easing to around 2,200 pence in GBP post-results. This values the company at approximately 12 times forward earnings, in line with consumer staples peers.

Primark's European Expansion Hits Headwinds

Primark opened 11 new stores and expanded 28 existing ones, adding 460,000 square feet. International sales now represent 45% of total, up from prior periods. However, like-for-like sales in Continental Europe rose only 1.0%, pressured by the stronger pound.

Management noted improved product availability after supply chain disruptions eased. Womenswear and childrenswear performed well, offsetting men's weaker showing. Full-price sales mix improved to 52.2%, aiding gross margins at 44.1%.

Yet, footfall declined 2% in the UK, signaling broader retail caution. Primark's value proposition remains key in inflationary times, but rivals like Next and H&M gained share in fast fashion.

Looking ahead, Primark targets 60,000 square feet of mat expansions annually. Online trials in clothing begin this year, potentially unlocking new growth without cannibalizing stores.

Grocery Division Grapples with Cost Inflation

ABF's grocery arm, including Twinings and Kingsmill, faced margin erosion. Adjusted operating profit dipped as raw material inflation outpaced pricing actions. Sugar segment profit fell 12% to £122 million on higher beet costs.

European operations provided some offset, with stronger eurozone demand. However, UK volume pressures persisted amid health trends favoring plant-based alternatives. Brands like Ovaltine maintained market share through innovation.

Management invested £50 million in capacity, targeting efficiency gains. Long-term, the division eyes premiumisation to rebuild margins above 10%.

Financial Strength Supports Resilience

Strong cash generation enabled £250 million in dividends and £300 million share buyback. Return on capital employed stayed robust at 18%. Pension deficit narrowed, bolstering balance sheet.

Interest cover exceeded 12 times, giving flexibility for investments. No major debt maturities loom until 2028. This positions ABF well versus leveraged peers like Tesco.

Risks from Macro Environment and Competition

Consumer spending slowdown poses near-term threat, especially in UK apparel. Commodity volatility could further squeeze groceries. Primark's store-heavy model exposes it to rental inflation.

Regulatory scrutiny on sugar content and packaging grows in Europe. Currency swings impact 40% international revenue. Geopolitical tensions affect ingredients supply chains.

Upside risks include faster-than-expected rate cuts boosting discretionary spend. Successful online pivot could accelerate growth.

Why DACH Investors Should Watch Closely

Associated British Foods offers DAX-like diversification with FTSE 100 stability. Primark's 150+ stores in Germany, Austria, and Switzerland generate significant euro revenue, hedging GBP weakness. Grocery exports to DACH provide steady staple demand.

Valuation at 12x earnings appears attractive versus European peers like Henkel. Dividend yield near 3% appeals to income-focused portfolios. Exposure to value retail resonates in cost-conscious German markets.

Monitor Q4 trading updates for Primark recovery signs. Analyst consensus targets 2,500 pence on London Stock Exchange in GBP, implying 13% upside.

Strategic Outlook and Investor Implications

ABF maintains full-year profit guidance of £1.9 billion adjusted operating profit. Focus shifts to cost discipline and selective expansion. Primark's US pilot and Asia entry add long-term catalysts.

For DACH investors, the stock balances consumer cyclicality with defensive food traits. Portfolio allocation of 2-4% suits moderate-risk strategies. Track UK election impacts and ECB policy for eurozone ripple effects.

Disclaimer: This is not investment advice. Stocks are volatile financial instruments.