Associated British Foods (AB Foods), the owner of Primark and several major food brands, is considering separating its fashion retail arm from its food operations as it seeks to boost long-term value for shareholders.
The FTSE 100 conglomerate said on Monday that its board is reviewing the group’s structure, with investment bank Rothschild & Co advising on the process. While no final decision has been made, the review could result in a formal split between Primark — known as Penneys in Ireland — and the company’s food businesses, which include Twinings tea, Ovaltine, and Ryvita.
The announcement came as AB Foods reported a 13% decline in full-year profit, largely due to a weak performance in its sugar division. For the year ending September 13, the group posted an adjusted operating profit of £1.73 billion, with total revenue down 3% to £19.46 billion.
Primark, which operates 475 stores across 18 countries, accounted for 65% of the group’s operating profit, highlighting its dominance within the company. Based on AB Foods’ market capitalization of £16.3 billion, analysts estimate Primark’s standalone value at about £10.6 billion.
Group Chief Executive George Weston, who has long defended AB Foods’ diversified structure, said the review had been under way for “several weeks” and should conclude by April 2026, when the company reports its first-half results.
“We wouldn’t be announcing this review if we didn’t think that there was a fair likelihood of it happening,” Weston told Reuters. “But there are a number of issues that we can now investigate which could make us think that keeping them together was a better idea.”
The review is being conducted in consultation with AB Foods’ largest shareholder, Wittington Investments, which owns 58.8% of the company and remains committed to holding majority stakes in both potential businesses.
Analysts welcomed the possible move. Barclays described the potential Primark spinoff as a “positive surprise,” noting that the fashion retailer’s scale justified its independence and that AB Foods’ food units were currently undervalued.
However, investors reacted cautiously, with AB Foods’ shares falling 2.6% to 2,210 pence on Monday morning, trimming year-to-date gains to 8.6%.
While Primark’s adjusted operating profit rose 2% during the year, earnings in the grocery division fell 6%, and the sugar unit barely broke even due to weak European prices.
Looking ahead, AB Foods said it expects growth in operating profit and earnings per share in 2026, though it warned that consumer spending is likely to remain subdued amid ongoing economic uncertainty.
