DAVY VIEW

We see challenging trading conditions persisting for Associated British Foods (ABF) through 2026. Primark’s like-for-like (LFL) growth is likely to remain subdued, with increasing reinvestment needed to maintain its market position rather than stimulate growth. Equity performance remains tied to Primark LFLs. In the food division, momentum is limited by ongoing pressures, particularly in Sugar, leaving little scope for an inflection in earnings. We therefore expect adjusted profits will not return to FY24 levels until FY27, pointing to several years of retrenchment. While this is more than reflected in the current valuation, the backdrop keeps us cautious. As such, we lower our price target to £23 and our rating to ‘Neutral’.