Robyn Duffy, Consumer Markets Senior Analyst at RSM UK, comments on Primark owner Associated British Foods’ (ABF) results: “Weak year-on-year sales growth in the first half of the year has added weight to proposed demerger plans at ABF which are now confirmed. Splitting the food and fashion businesses will deliver much-needed space to rebuild demand in each business – allowing the food business to take on competition from own-label brands and Primark to refocus on its value proposition.

“ABF’s decision to separate its food and retail businesses is timely in light of current geopolitical volatility. The ongoing Middle East conflict underscores why separation is important for the long-term success of both the food and retail business.

“ABF’s food business faces heightened supply-side shocks in the current environment, such as energy, fertilizer and packaging cost spikes, while Primark is more exposed to demand-side risks, such as weakened consumer confidence and reduced discretionary spending. Separating the two will allow investors to cleanly assess each business’s unique cost and demand drivers independently as well as factoring in market pressures.

“In a competitive market, Primark has continued work to do on its digital footprint to compete with the likes of Shein which is increasingly encroaching on its customer footprint. Simultaneously it must refocus on its value perception with consumers, in addition to making its global stores work harder by increasing marketing and digital spend. Separately, the food business must grapple with the CMA's probe into it's proposed acquisition of Hovis and other market challenges, including regulatory changes and changing consumer preferences in light of GLP1 drugs.

“The current environment highlights the clear need for separation. The next question will be the timeframe for delivery within the 2027 timeframe and making sure this doesn’t distract leadership from tackling separate market challenges that each business faces in the current volatile climate.”

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