ABF price target clipped as Swiss bank avoids Primark demerger distraction, says weaker sales remain in focus Proactive uses images sourced from Shutterstock
Analysts at UBS have trimmed the bank’s target price on Associated British Foods PLC (LSE:ABF) to 2,050p from 2,240p (current price: 1,828p), in the wake of this week’s news that the UK conglomerate will spin out Primark.
UBS, meanwhile, kept a ‘Neutral’ rating, arguing that while the planned demerger of Primark is the right strategic move, investors are likely to stay fixated on weak like-for-like sales at the discount fashion chain.
The Swiss Bank said separating Primark from ABF’s food operations should help unlock longer-term shareholder value by creating two more focused businesses with clearer governance and investment cases.
But that story sits further out. In the relatively short term, UBS expects the demerger to be completed by the end of 2027, leaving the near-term spotlight firmly on trading softness, especially at Primark.
That pressure was clear in the first half, it noted, as Primark reported like-for-like sales down 2.7%, while its 10.1% margin reflected heavier markdowns in a difficult consumer environment.
UBS said softer April trading across markets underlined the challenge, even if foreign exchange tailwinds and lower markdown intensity may offer some support later. The broker said stronger like-for-like sales at Primark remain the key ingredient for any re-rating in ABF shares.
UBS also sharpened its caution on sugar, where it sees no clear recovery in European pricing and no visible inflection into FY27.
That pushed the biggest downgrades in the note, with the broker now forecasting a £25 million EBIT loss in both FY26 and FY27 for the division.
Group adjusted EBIT forecasts were cut by about 4% for FY26 and 9% for FY27, while Grocery and Ingredients were left broadly unchanged, aside from some expectation of second-half help from cocoa price trends.