Shares in Associated British Foods (ABF) dropped by over 9% earlier today as it reported that like-for-like sales at Primark are expected to drop by 2.6% year-on-year in the 12 months to 12 September.

The multinational food processing and retailing group stated in its latest update that despite a challenging consumer environment in most markets, it has continued to strengthen its Primark customer proposition.

As a result, it has stated that it will soon offer a home delivery service in Great Britain, alongside its click and collect offering. It said this decision follows its digital strategy, which aims to deliver “incremental growth” while complementing its store-led model.

In its grocery division, ABF said it expects to deliver mid-single-digit growth in Q4, with the acquisition of Hovis and its subsequent integration expected to drive cost synergies, leading to a “sustainably profitable business”.

However, this division’s adjusted operating profit is expected to be slightly below previous expectations, following the short-term impacts on Twinings and Ovaltine.

In sugar, ABF saw sales and profitability drop in Q4 in the UK and Spain due to lower average selling prices in Europe year-on-year. It announced in July its intention to reduce its footprint from four to three sites in the UK, which is set to enable it to meet existing customer demand more efficiently.

For the full-year, this division is expected to deliver an adjusted operating loss between £70m and £170m, up from a previous guidance range of £25m to £60m.

Chief executive at ABF, George Weston, stated: "The group delivered resilient trading in the quarter. The Hovis integration is well underway and we're announcing today that Primark will be offering home delivery in Great Britain.

"Actions to strengthen Primark's customer proposition have continued at pace. Our priority focus areas, the UK and womenswear, continued to outperform our other markets and categories. Trading in continental Europe remained challenging, where actions to strengthen our customer proposition are at an earlier stage. The recent launch of our 'Iconic Value' campaign is a strategic investment in price and price perception and the initial customer reaction has been encouraging. Primark has made significant progress in building its digital capabilities and will continue this through both growing Click & Collect and by offering home delivery in Great Britain in the future. There is now an opportunity for incremental and profitable growth through this channel.

"Grocery and Ingredients both delivered good growth in the quarter, although the prolonged hot weather in the UK and Europe impacted consumer demand for Twinings tea. While a number of factors contribute to our negative outlook for Sugar in 2027, the recent positive turn in European and global sugar pricing should benefit future years.”

Head of markets at interactive investor, Richard Hunter, said there is “plenty for the bears to feed on within this update”.

He concluded: “It is a timely reminder of the difficulties of listing as a pure retailer in investment terms, as evidenced by the poor recent reception to rival Shein’s much-vaunted IPO in Hong Kong, which could yet prove to be a salutary warning. In the meantime, and for the group as a whole, the weight of a loss-making Sugar business, stuttering Grocery and Agriculture units and the eventual loss of Primark as a standalone stock is currently too much for investors to bear.

“Despite maintaining guidance for the year on adjusted operating profit, this number is the result of a previous profit warning earlier in the year which has weighed heavily. Indeed, even prior to today’s precipitous drop, the shares had fallen by 10% over the last year, as compared to a gain of 16% for the wider FTSE 100, and the market consensus has recently deteriorated to a sell with no obvious remedies in sight.”

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