Associated British Foods Q3 26 preview - Still not out of the woods

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Associated British Foods Q3 26 preview - Still not out of the woods

-1.5% yoy for the 16 weeks overall (H1: -2.7%). We olivia.b.petronilho@jpmorgan.com

leave our group forecasts materially unchanged, looking for FY 26E PBT -11% yoy

Key Changes (FYE Sep)to £1.5bn (in line with BBG cons). Looking ahead, we see Primark as one of the

Prev Cur Δ

most vulnerable within our coverage to further negative earnings momentum Adj. EBIT - 26E (£ mn) 1,554 1,566 0.7%

should the conflict in Iran continue, due to a combination of exposure to lower Adj. EBIT - 27E (£ mn) 1,620 1,612 -0.5%

income demographics, and inflationary pressures in COGS (given arguably more

limited opportunity to pass through higher prices). We do not think these risks are Style Exposure

fully reflected in the valuation (despite the c.9% ytd decline in the share price, the

stock has re-rated by a LSD%). Hence, despite the already high short interest, we

remain somewhat cautious.

• Solid May UK clothing market, but unlikely support a positive LFL for the

whole period. Since the end of ABF’s first half (to end Feb) we think that the

clothing market backdrop has been volatile - indeed at the H1 results

management referenced an encouraging Mar for Primark, but followed by

softer trading in Apr. This was also the case in the UK, which slipped back into

negative LFL territory in Apr (also evidenced in Worldpanel data). We are also

mindful that: (1) the UK business faces a comparative which becomes 5-6% pts

tougher into the second half (H1 Primark UK&I LFL +1.1% yoy on a comp of

-6%); and that (2) whilst recent UK clothing market data has been stronger for

May, online sales fared much better in the month than stores given the extreme

heatwave. Of course, Jun sales are yet to be seen, although the frequent rainfall