British Associated Foods (ABF) shares plunged 9% as Primark's weak performance in European markets

Core Points

Primark's fourth quarter store sales are expected to fall 3%, Among them, the continental European market fell 4.3%

ABF (Associated British Foods) shares plunged more than 9% in early trading in London on Thursday.

The sugar division's adjusted operating loss forecast for 2027 expands to 70 million to 170 million pounds.

The full-year adjusted earnings per share is expected to exceed previous forecasts.

announced the launch of Primark door-to-door delivery service in the UK. The retail and food division division is moving towards its December 2027 target.

Primark division faces challenges.

Following the release of a quarterly trading statement, Primark's same-store sales are expected to fall 3% in the period ending September 12, Shares of Associated British Foods (ASBFY) plunged more than 9% in early trading in London on Thursday. Shares were trading at about 1,854 pence, well below a 52-week high of 2,351 pence.

Weak results were mainly concentrated in continental Europe, where same-store sales shrank 4.3%. Although the UK and Ireland achieved modest growth of 0.4%, this increase was not enough to offset the broader European decline.

Analysts at Jefferies gave a blunt assessment, describing the performance as a "flat end to Primark's year led by disappointing European sales" and labeling the company's future guidance as "stock outlook this morning."

Despite the contraction in same-store sales, Primark's overall sales for the year are expected to expand by approximately 2%. Store expansion initiatives and franchising business models contributed approximately 5% to overall growth. Primark's adjusted operating profit margin is still expected to reach approximately 10%.

The U.S. market shows positive momentum. Revenue increased approximately 11% for the quarter as Primark's U.S. business expanded to 47 stores nationwide. Franchise operations in the Gulf region have also shown strong performance and plans to expand in Saudi Arabia and Mexico.

Food segment intensifies challenges

In the food segment, adjusted operating profit from the grocery business is expected to be slightly lower than previous forecasts. Affected by the unusually long warm winter weather, sluggish consumer demand for Twinings tea products was identified as the main reason.

Driven by rising natural gas costs and sluggish sugar prices in Europe, the sugar sector's current trajectory points to the upper end of its 2026 adjusted operating loss forecast range of £ 25 million to £ 60 million. Profits in the ingredients division are expected to be in line with previous forecasts.

Looking to a longer window period, ABF provides a cautious tone of preliminary guidance for 2027. Adjusted operating losses for the sugar sector are expected to be between £ 70 million and £ 170 million, a significantly expanded range to include potential headwinds including high gas costs and severe weather that affects operations in Africa.

Despite the one-time impact of integrating the recently acquired Hovis business, profitability in the grocery business is expected to be slightly above 2026 levels. Profits in the agricultural sector are expected to grow year-on-year.

Broader Market Background

ABF shares were not the only target facing selling pressure on Thursday. As tensions between the United States and Iran mount, Brent crude oil prices topped $100 a barrel and the FTSE 100 index fell to its lowest level in seven weeks, creating broader market headwinds that exacerbate ABF's company-specific challenges.

Full-year adjusted earnings per share are now expected to exceed previous guidance, which in part forms a modest hedge against overall pessimistic expectations.

The company has officially confirmed that it will launch Primark door-to-door delivery services throughout the UK, thanks to the recent acquisition of an automated distribution centre in Sheffield.

The expected separation of the retail business and the food segment continues to advance as planned, with a target completion date of December 2027.

Full annual results are scheduled to be released on November 3.