AB Foods plans Primark home delivery as heatwave dents sales

Associated British Foods PLC on Thursday said it will launch a home delivery offering from its Primark retailing arm, as it reported "resilient" fourth quarter trading despite some pressure from the summer heatwave in retail and tea, and weaker pricing in sugar.

To aid the home delivery push, Primark Stores Ltd has purchased a distribution centre from boohoo Group PLC. boohoo shares surged following news of the sale, which it said will cut debt.

AB Foods shares were down 9.7% to 1,824.00 pence each in London on Thursday morning. boohoo shares were up 10% to 23.37p.

AB Foods is a London-based food and ingredients producer, plus a fast-fashion clothing retailer via Primark.

It said that for the financial year which concludes on Saturday, it sees adjusted operating profit in line with prior expectations, but earnings per share "ahead".

In July, AB Foods said it expected adjusted operating profit and adjusted EPS "to be below last year". In financial 2025, adjusted operating profit amounted to £1.73 billion, while adjusted EPS was 174.9 pence.

At Primark, AB Foods expects fourth-quarter sales growth of 2% on-year, as well as a 2% rise for the financial year as a whole. But on a like-for-like basis, a 3.0% fourth-quarter decline is expected, along with a 2.6% yearly fall.

In the UK alone, Primark total sales are expected to rise 1% in the fourth quarter and 2% for the whole year.

"While trading in the quarter started strongly, sales were then impacted by the prolonged hot weather, which delayed the seasonal purchasing catalyst for autumn/weather clothing. Trading was stronger when the weather cooled towards the end of the quarter. Click & Collect sales continued to grow well in the UK," AB Foods said. "In continental Europe, where consumer confidence remains weak, sales are expected to be down 1% in Q4, with like-for-like sales down around 4.3%."

It expects US Primark sales to surge 11% on-year in the fourth quarter, but "underlying trading was challenging in a difficult consumer environment". There was also a "strong comparator period".

Chief Executive George Weston added: "Actions to strengthen Primark's customer proposition have continued at pace. Our priority focus areas, the UK and womenswear, continued to outperform our other markets and categories. Trading in continental Europe remained challenging, where actions to strengthen our customer proposition are at an earlier stage.

"The recent launch of our 'iconic value' campaign is a strategic investment in price and price perception and the initial customer reaction has been encouraging. Primark has made significant progress in building its digital capabilities and will continue this through both growing Click & Collect and by offering home delivery in Great Britain in the future. There is now an opportunity for incremental and profitable growth through this channel."

Great Britain refers to the UK excluding Northern Ireland.

AB Foods, which in April announced it will demerge Primark, said work on the split is "progressing well" and is set to be completed in December 2027.

The April decision followed a strategic review, announced by AB Foods last November. It is intended that both Primark and the remaining 'FoodCo' will be listed on the London Stock Exchange and, given their scale, both are expected to be constituents of the FTSE 100 index. Following the demerger, FoodCo will retain the Associated British Foods PLC name.

Along with discount retailer Primark, AB Foods owns an array of food manufacturing brands including Twinings tea, Kingsmill bakery, Jordans cereals and Mazola cooking oils. Adding to that stable, it acquired the Hovis bread brand in July.

AB Foods said on Thursday: "In July, we completed the acquisition of Hovis and we are progressing at pace with the integration of its production and distribution facilities with our bakeries business. We expect to drive significant cost synergies to invest in innovation and create a sustainably profitable business."

AB Foods expects fourth-quarter grocery sales "to grow in the mid-single digits", but full-year adjusted operating profit is expected to be slightly below prior expectations. Twinings saw growth in Australia but lower than expected sales in the UK and Europe as the hot summer reduced tea demand.

Ingredients sales are expected to increase by some 10% in the quarter, with annual adjusted operating profit in line with a prior view.

In Sugar, AB Foods saw "lower average selling prices in Europe" during the quarter compared to a year prior.

For financial 2026, the Sugar unit's adjusted operating loss is expected to land towards the higher end of a previous guidance range of £25 million to £60 million. AB Foods noted the recognition of contract provisions partly due to the weaker European sugar prices, as well as higher gas costs and lower UK beet yield expectations.

Finally, in Agriculture, a mid-single digit fourth-quarter sales fall is expected, while full-year adjusted operating profit is expected to be in line with a prior view.

Looking to financial 2027, AB Foods expects to see progress in most of its units, "with the exception of Sugar and the impact of the Hovis integration on Grocery".

It added: "However, we remain cautious on consumer sentiment and also the impact of inflation and higher energy costs."

For financial 2027, a Retail adjusted operating margin of 10% is expected. Grocery adjusted operating profit is expected to be slightly higher on-year, while in Ingredients, it is expected to be "broadly in line" with financial 2026.

Sugar is expected to register an adjusted operating loss in the range of £70 million to £170 million, and Agriculture adjusted operating profit is to be ahead of financial 2026.

On Sugar, AB Foods added: "There are a number of factors that could materially influence the outcome, either positively or negatively, in particular: significantly higher gas costs; production levels in Africa; El Nino weather impacts; and currency movements, especially the Malawian kwacha.

"The higher end of the guidance range assumes all of these variables have a negative impact on performance. Despite an expected significant reduction in European sugar production, it is likely that the European sugar market will remain in surplus in the short term due to the high inventory levels carried over from 2025. However, the recent positive turn in European and global sugar pricing should benefit future years."

AB Foods will release its annual results on November 3.

To "enable" its home delivery push, AB Foods has acquired a "highly-automated fulfilment facility in Sheffield". The distribution centre has been purchased from boohoo Group PLC. boohoo, which trades as Debenhams, said the deal "significantly" contributes towards its deleveraging.

As a result of the £90 million sale, boohoo now expects net debt to be "negligible" at its February financial year end.

boohoo said £76.5 million was received on completion, with the remainder to come early next year.

"Concurrently, the group is entering into an agreement with a global [third-party logistics provider] that will enable it to continue to fulfil its stocked product as efficiently as it does today and will allow the group to scale its Delivered by Debenhams fulfilment proposition beyond fashion," boohoo added.

Copyright 2026 Alliance News Ltd. All Rights Reserved.