Primark owner warns of impact of war in Iran on outlook - making it one of the first European retailers to do so

By Nora Redmond

Primark to be spun out of AB Foods next year, company says

Associated British Foods announced it will be spinning off clothes retailer Primark.

Associated British Foods, the owner of Primark, appears to have become the first European retailer to warn of the impact of the war in Iran on profits.

The food processing and retailing company reported a disappointing set of results at a time when e-commerce growth has been strong across the U.K, with group sales of GBP9.47 billion in the 24 weeks ending Feb 28, compared to analysts' estimates of GBP9.52 billion. It also posted earnings per share of 70.7p, representing a 3% miss.

AB Foods (UK:ABF), which said operating profit declined by 18% to GBP691 million in the first half of its financial year, noted that it expects its profit for 2026 to be lower than last year's. It said that its grocery and ingredients businesses, mainly sugar, had dragged profit down.

"An encouraging start to spring/summer trading in March was followed by softer trading in April, as we started to see the impact of the Middle East conflict on the consumer," the group said in a statement on Tuesday of its retail arm.

The 91-year-old company added that it predicts the cost consequences of the conflict in Iran to be "manageable" this year, but it is tracking the potential further weakening in consumer spending and the longer-term consequences for costs like energy, transport and fabric if the war continues.

"This is, to our knowledge, the first European clothing company to report softening consumer trends in Europe based on the war, and highlights the vulnerability of exposure to lower-income consumers," analysts at Jefferies, led by Frederick Wild, wrote in a note.

AB Foods, which also makes Twinings tea and Patak's curry sauces, said it reassessed possible risks for the rest of the year, highlighting increased geopolitical instability amid ongoing conflicts in the Middle East and Ukraine.

"The uncertainty regarding the scale and duration of any blockade of the Strait of Hormuz is expected to affect both the availability and cost of raw materials and critical commodities," it said, adding that consumer confidence could soon be affected if inflation increases.

Shares in AB Foods fell by just over 3%, bringing total losses down to about 14% since the start of the year.

It comes as e-commerce growth has been strong across the U.S., U.K. and Europe, according to Cantor Fitzgerald. A report written by a team of analysts, led by Ramsey El-Assal, found that growth has averaged 13% in the U.K. in the first two months of 2026.

But the momentum in the sector does not appear to have extended to AB Foods, which also announced it would be spinning off Primark, with the anticipation that both the clothes retailer and its food unit would become two separate components of London's FTSE 100 index UK:UKX.

"The unit, long since the group's jewel in the crown and accounting for half of group revenues, is possibly reaching a size where it requires laser focus to capitalize on its own growth prospects, particularly overseas where the greatest potential is seen," Richard Hunter, head of markets at Interactive Investor, wrote on Tuesday.

-Nora Redmond

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04-21-26 0530ET