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Primark Spin-Off — Smart Move or Risky Timing?

Investors’ Chronicle
Investors’ Chronicle•Apr 23, 2026

Why It Matters

The de‑merger offers investors a cleaner exposure to UK retail and food sectors, potentially erasing the conglomerate discount and enabling focused growth strategies for each business.

Key Takeaways

  • •ABF will demerge Primark, creating two FTSE 100 entities by 2027.
  • •Food and fashion units have similar revenue (~£9.5‑9.8bn) but different profits.
  • •Food division faces sugar losses and weak grocery margins, limiting earnings.
  • •Primark’s low‑margin model pressured by rising polyester costs and weaker demand.
  • •Spin‑off could lift valuation by removing conglomerate discount and sharpening focus.

Summary

Associated British Foods (ABF) announced it will split its Primark clothing arm from its food operations, creating two independent companies listed on the London Stock Exchange. The de‑merger, slated for completion by the end of 2027, will allocate roughly £9.5‑9.8 billion in revenue to each entity, positioning both as potential FTSE 100 constituents.

Current results show the food side struggling: sales fell about 2% year‑on‑year, grocery profit is down 20%, and the sugar division remains loss‑making, dragging overall earnings momentum. Primark, while still growing store numbers, reported weaker consumer demand in April and is feeling the squeeze of a 30% jump in polyester input costs, which erodes its already thin margins.

Leadership will stay split, with George Weston retaining the food business and Owen Ton heading the newly independent Primark. Analysts cite a long‑standing conglomerate discount on ABF’s shares, and the recent defensive acquisition of Hov Bread for the Kingsmill brand underscores the food unit’s need to consolidate rather than expand. Primark’s limited e‑commerce presence also surfaces as a potential growth avenue post‑spin‑off.

The separation could unlock clearer valuation for both businesses, allowing investors to price food and retail assets on their own merits. It also gives each company the freedom to pursue tailored strategies—ABF may consider further disposals or niche acquisitions, while Primark could explore digital sales channels—potentially improving long‑term profitability for both.

Original Description

Associated British Foods is spinning off Primark — but this isn’t a simple value unlock story.
The group plans to separate its food and fashion businesses, giving investors direct exposure to both. But the move comes at a tricky time, with weak trading across parts of the food division and growing pressure on Primark from higher costs and cautious consumers.
In this video, Erin Withey joins Dan Jones to break down how the demerger will work, why ABF is making the move now, and whether a standalone Primark and food business can deliver better returns.
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