Associated British Foods Explores Primark Spin-Off Amidst Sales Decline

ABF Considers Major Structural Change

Associated British Foods (ABF), the diversified international group that owns fast-fashion giant Primark, is currently undertaking a strategic review that could lead to the separation of its retail arm from its extensive food businesses. The announcement comes as ABF reported a 13% decline in full-year profit and a 3% drop in group revenues to £19.5 billion for the 52 weeks ending September 13.

The potential spin-off is being explored with the aim of 'maximising long-term value' for the company. Advisory firm Rothschild & Co has been enlisted to assist with the review.

Primark's Performance and Market Conditions

The consideration of a spin-off follows a challenging period for Primark. The retailer experienced a 3.1% fall in like-for-like sales in the UK and Ireland for the year to September. Across fiscal 2025, Primark's overall like-for-like sales declined by 2.3%. This downturn is attributed to 'cautious consumer sentiment' and a 'decline in the UK clothing retail market,' with ABF noting 'particularly weak shopping activity within elements of Primark's customer base.'

Despite these challenges, Primark's operating profit saw a 2% growth, and its total sales remained largely flat at £9.5 billion at actual currencies, boosted by new store openings.

ABF's Diverse Portfolio and Strategic Rationale

Associated British Foods operates a broad portfolio across five key segments: retail, grocery, ingredients, agriculture, and sugar. Its well-known food brands include Twinings tea, Ovaltine, Ryvita, Jordans cereals, and Kingsmill bread. The food business, particularly the sugar division, faced difficulties, recording an operating loss of £2 million.

Analysts suggest that a separation could allow Primark, often seen as a faster-growing apparel business, to achieve a higher valuation as a standalone entity. This move could also provide a sharper strategic focus for both the retail and food operations, which target distinct consumer markets.

Ownership and Future Outlook

The Weston family's Wittington Investments, which holds a majority stake in ABF, is backing the strategic review and has affirmed its commitment to maintaining majority ownership of both businesses should a separation occur. George Weston, ABF's Chief Executive, has expressed his full support for the review.

ABF has stated that no final decision has been reached regarding the spin-off, and an update on the review will be provided 'as soon as practicable.' The company anticipates that the consumer environment will 'remain subdued' for Primark, while its international grocery brands are expected to deliver 'good growth in sales and profit.'