ABF Cut to Sell as Primark Value Position ‘More at Risk’

Citi downgraded Associated British Foods (LON: ABF) to “Sell” in a note this week, citing concerns over Primark's sales outlook and growing competition from online discounters and resale platforms.

The investment bank has a price target of 1,770p per share on the stock, representing an expected total return of -6%. ABF shares are down almost 19% in the last six months.. It is trading around the 1,976.5p mark after a 1.3% decline so far in Tuesday's session.

The downgrade comes as Citi forecasts FY25 and FY26 earnings per share for ABF to be 4% and 15% below consensus estimates, respectively. 

The bank highlights particular concerns about Primark, ABF’s flagship retail brand, suggesting that its value position is “more at risk.” 

The investment bank’s analysts explain that the view is based on data indicating increased switching and audience overlap with online discount retailers and resale platforms, which could potentially erode Primark’s market share.

Citi also predicts a challenging sales environment for Primark, forecasting a 4% decline in sales for FY25 and a 7% drop for FY26 compared to consensus expectations. The report warns of a -170 basis point drag on Primark’s gross margin in FY26 due to the strengthening of the US dollar.

Beyond retail, Citi sees additional risks for ABF’s UK food businesses, which comprise 33% of the company’s total food operations. 

The analysts point to accelerating UK food inflation in 2025 as a potential threat to growth and pricing power in this segment.