Associated British Foods: Primark Store Growth Offsets Weak Like-for-Like Sales

Key Morningstar Metrics for Associated British Foods

• Fair Value Estimate
  : GBX 2,000.00
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : None
• Morningstar Uncertainty Rating
  : Medium

Associated British Foods ABF delivered 3% constant currency sales growth for the fiscal third quarter of 2026, driven by store openings in Primark and solid growth in grocery and ingredients, slightly offset by continued pressures in sugar and agriculture. Shares declined 2% intraday on July 1.

Why it matters: Primark’s 3% constant currency growth is driven by a 5% contribution from store openings, which masks a 2% like-for-like sales decline. Positive like-for-like was achieved in womenswear in the UK, but the rest of the world continues to struggle due to low brand awareness and weak consumer sentiment.

• We believe Primark should see positive growth from new store openings, while same-store sales will likely remain flat or slightly decline, weighed down by intense competition and lagging digital capabilities.
• ABF’s food business is shadowed by a troubled sugar business, struggling with low sugar prices combined with an elevated cost base due to gas price volatility and production delays. Management expects the troubles to continue into 2027 and guides for an operating loss of £60 million, at the upper end of its previously indicated range.

The bottom line: We confirm our fair value estimate of GBX 2,000 per share for no-moat ABF. We view shares as fairly valued at current levels.

• The upcoming Primark separation should bring a leaner structure for both businesses and support focused execution. We believe Primark has room for store base expansion in international markets, especially in the United States, where it has just opened its 43rd store, while H&M, for example, operates more than 500 US stores.
• In foods, we do not see ABF growing faster than the industry, as we project average sales growth of only 1%-2% for the combined foods businesses, with operating margin remaining largely stable over the next five years.