DAVY VIEW

We remain cautious on Associated British Foods (ABF) ahead of its FY26 results (November 3rd). While Primark’s recent price reductions should support its competitive position, we expect the volume response to lag the initial pricing impact – leaving like-for-like (LFL) growth under pressure against a subdued apparel demand environment. We expect forward buying and cost controls to support FY27 margin guidance, although the progressive rollover of existing cover and continued uncertainty around Sugar leave group earnings exposed to further revision risk. Against this backdrop, we believe the current valuation provides limited margin of safety, particularly given the extended execution uncertainty surrounding the upcoming demerger.