Associated British Foods has announced plans to separate its fast-growing fashion retailer Primark from its diversified food businesses, marking a major restructuring aimed at unlocking value for shareholders and improving market clarity across its operations.
Primark, known as Penneys in Ireland, will be spun off into an independent listed company with its own board and shareholder base. The move will see it operate separately from AB Foods’ food portfolio, which includes well-known brands such as Twinings, Ryvita and Ovaltine, along with sugar, agriculture and ingredients businesses operating across 52 countries.
The group said the separation will allow investors to better assess and value the two distinct businesses. Primark currently operates 486 stores in 19 markets and generates around £9.5 billion in annual revenue, while the food division reports approximately £9.8 billion.
Chief executive George Weston said the decision was not driven by short-term trading pressures and had the backing of major shareholders, including the Weston family’s Wittington Investments, which owns just under 60% of the company. He ruled out a sale of Primark during the review process.
Despite the strategic rationale, the announcement comes at a challenging time for the group. AB Foods reported an 18% drop in first-half core profit and warned that full-year earnings will fall below last year’s level. The company cited weaker consumer demand, pressure in European markets, subdued conditions in US food ingredients and uncertainty linked to global geopolitical tensions.
Primark itself faces increasing competition from online fast-fashion platforms such as Shein and Temu, while trading conditions have remained uneven across regions. The group noted that a strong start to spring and summer sales in March was followed by softer performance in April.
On financial markets, shares in AB Foods fell around 4% following the update, extending a year-long decline of roughly 17% and valuing the company at just under £13 billion. Analysts have previously suggested that Primark trades below comparable peers when assessed separately from the wider group.
RBC analysts said the split could improve investor interest over time, although they cautioned that both resulting companies would still face a difficult consumer environment. Quilter Cheviot analyst Chris Beckett said the move is more about corporate structure than transformational change, noting that both businesses would remain ultimately linked through family ownership structures.
The demerger is expected to be completed by the end of 2027. AB Foods estimates separation costs at around £75 million, with potential operational inefficiencies of under £45 million. Following completion, shareholders will receive stakes in both newly listed entities.
The company also acknowledged that ongoing geopolitical instability, including the conflict involving Iran, could continue to affect consumer sentiment and retail performance, although it expects the direct financial impact to remain manageable for now.
