Associated British Foods to Spin Off Primark Amid Market Challenges

Associated British Foods Plc (ABF) has announced plans to separate its budget fashion retailer Primark from its food business, a move expected to be completed by the end of 2027. This decision follows an extensive strategic review initiated in November 2025, aimed at enhancing shareholder value and allowing both entities to focus on their respective markets. Primark, which operates 486 stores across 19 countries and generates approximately £9.5 billion in annual revenue, will become one of Europe's largest standalone clothing companies. Meanwhile, the food division, which includes brands like Twinings and Kingsmill, will retain the AB Foods name and is projected to generate around £9.8 billion in revenue.

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The announcement coincided with ABF's interim financial results, revealing a 2% decline in group revenue to £9.5 billion and a 19% drop in pre-tax profits to £632 million for the six months ending February 28, 2026. The company cited a "difficult retail environment," exacerbated by the ongoing conflict in the Middle East, which has negatively impacted consumer confidence and spending. Primark's like-for-like sales in the UK grew by 1.3%, but sales in continental Europe fell by 5.6%, highlighting the challenges faced by the retailer.

Primark to separate from Associated British Foods by 2027

ABF's leadership believes that separating Primark from its food operations will allow for more specialized governance and a clearer investment proposition for shareholders. George Weston, ABF's CEO, emphasized that the separation will enable both businesses to pursue tailored strategies that align with their unique market dynamics. The demerger is expected to incur one-off costs of approximately £75 million and result in dis-synergies of less than £45 million annually.

AB Foods Plans Primark Demerger From Food and Drink Business

Despite the strategic rationale, analysts have expressed concerns regarding Primark's vulnerability as a standalone entity. Robyn Duffy, a senior analyst at RSM UK, noted that Primark may face increased exposure to demand-side risks, particularly as consumer spending declines due to geopolitical tensions. Additionally, Dan Lane, lead analyst at Robinhood UK, pointed out that while Primark has historically driven a significant portion of ABF's profits, its independence may expose it to greater market pressures without the support of the broader conglomerate.

Associated British Foods confirms £10bn Primark spin-off

ABF's chairman, Michael McLintock, stated, "The board has concluded that a demerger of Primark is the best way to maximize long-term returns for shareholders." Both businesses are expected to be listed on the FTSE 100, allowing investors to assess their performance independently. The company remains optimistic about the future, with Weston asserting, "We are managing the impacts of the Middle East conflict... However, there is a risk to Primark sales if the conflict persists."

Primark to break away as Associated British Foods bows to investor pressure - London Business News

The planned separation of Primark from Associated British Foods marks a significant shift in the company's strategy, driven by the need to adapt to a challenging retail landscape. As both entities prepare for their independent futures, the focus will be on navigating market pressures and capitalizing on growth opportunities in their respective sectors. The demerger is anticipated to provide clearer pathways for investment and operational focus, although the road ahead remains fraught with uncertainties.

Associated British Foods confirm split of Primark and food business