Associated British Foods Cuts FY26 Profit Outlook Amid Retail Softness and Ingredient Headwinds

Associated British Foods plc has downgraded its full-year earnings expectations, signaling that adjusted operating profit and adjusted earnings per share for fiscal 2026 will fall below prior-year levels. The shift marks a significant departure from the company’s earlier forecast and reflects mounting challenges across its Grocery and Ingredients divisions, which have proven more resilient in previous cycles.

Business Segment Performance Over 16 Weeks

The diversified conglomerate’s 16-week revenue picture through early January reveals a mixed performance landscape. While the Retail segment delivered encouraging growth of 4% on a reported basis, this momentum failed to offset weakness elsewhere. The Grocery segment flatlined, neither gaining nor losing ground, while Ingredients contracted by 3%. Sugar operations declined 2%, and the Agriculture segment posted a steeper 4% drop, creating a drag on overall profitability.

On a consolidated basis, Group revenue managed a marginal 1% increase in reported terms, though this evaporates entirely when adjusted for currency fluctuations, revealing a slight 1% decline at constant exchange rates. This narrow top-line expansion underscores the challenging external environment facing the group.

Primark’s Softer Start Raises Margin Questions

Primark, the company’s flagship retail banner, has experienced a notably difficult opening to the fiscal year. The performance has been decidedly mixed, with the UK market providing a telling snapshot. Primark achieved approximately 3% sales growth in the UK, accompanied by like-for-like sales expansion of around 1.7%—a lackluster figure that reflects a deeply competitive clothing market, particularly during the Christmas trading period.

Globally, Primark’s sales trajectory missed internal expectations, prompting management to recalibrate its first-half 2026 outlook to low single-digit growth. More significantly, the company now anticipates Primark’s adjusted operating profit margin will settle around 10% for the full year—assuming current sales momentum persists throughout the second half. This represents a material pullback from prior guidance, which had projected a margin slightly below the prior year.

Profit Pressure Across Core Operations

The revised outlook extends beyond Primark. Grocery and Ingredients operations are now expected to deliver adjusted operating profit for the full year that is moderately below 2025 levels, a reversal from earlier expectations that profits would remain broadly flat year-over-year. These two segments have emerged as the primary drivers of the company’s guidance reduction.

In contrast, the Agriculture segment’s adjusted operating profit is anticipated to remain in line with 2025 performance, while Sugar operations are forecast to show improved profitability. The company continues to expect a small adjusted operating profit contribution from Sugar in 2026.

Management Perspective and Next Steps

Despite the near-term headwinds, ABF’s leadership has maintained a measured tone on medium and long-term prospects. The company stated that while “tough trading conditions” are expected to persist in the coming months, it remains confident in the Group’s underlying growth trajectory over an extended horizon.

Full revenue breakdowns by business segment for the 16-week trading period are scheduled for release on January 22, providing investors with additional granularity on individual division performance.