Associated British Foods shares fell on Thursday despite saying earnings would come in slightly ahead of expectations, as it unveiled plans for Primark to start offering home delivery in Britain and warned of deepening losses at its sugar business.
The group, which owns Primark alongside a range of food businesses, said group adjusted operating profit would be broadly in line with previous guidance, while adjusted earnings per share would be ahead.
It also confirmed that the planned demerger of Primark from its food operations was progressing well and remained on track for completion in December 2027.
At Primark, the most eye-catching announcement was a move into home delivery.
The retailer, historically store-only, said it would in future offer home delivery in Great Britain, having acquired an automated fulfilment centre in Sheffield and building on the rollout of click-and-collect.
This may reflect mixed trading and an effort to revitalise sales. Full-year sales are expected to rise around 2%, but like-for-like sales are set to fall about 2.6%.
“Primark is turning to at-home delivery with like-for-like sales growth from existing stores seemingly stuck in transit” said Duncan Ferris, Analyst, Freetrade.
“The high-street giant, which currently exists as ABF’s retail arm, expects total sales to grow by 2% in Q4, but new stores look like the driver here. Like-for-like sales are slated to fall by 3%, with a 4.3% dip on the Continent standing out as a weak spot.
“With investment in price, product, and marketing not yet moving the needle on sales growth, Primark has taken a big leap with the announcement of home delivery.”
However, investors’ biggest concern came from the sugar business. ABF said the business would post a full-year operating loss towards the top of its £25m to £60m guidance range, hit by low European prices, higher gas costs, onerous contract provisions and a poor UK beet crop after the hot, dry summer.
Perhaps the biggest driving force of today’s 7% decline in shares was that ABF it guided to a much wider sugar loss of between £70m and £170m for 2027, and is cutting its UK sugar footprint from four sites to three.
Elsewhere, its grocery arm grew but came in slightly below expectations, as the hot summer curbed demand for Twinings tea, while it continued integrating the recently acquired Hovis bakery business. Ingredients grew strongly. ABF struck a cautious note on 2027, citing consumer sentiment, inflation and higher energy costs.