Primark Demerger: ABF Split Faces Weak European Sales 2026

Primark's demerger from Associated British Foods (ABF) is set to create two separate FTSE 100 companies by the end of next year, but the discount fashion retailer's lackluster performance in continental Europe is casting a shadow over the split. The business logic for separating Primark from ABF's diverse food empire—which ranges from Ovaltine to Twinings—is impeccable, yet the timing raises questions about whether the move will unlock the value that conglomerates often promise.

The Weston family, which controls ABF, has taken two decades to embrace the idea of a demerger. Reading this year's results statement, it's easy to see why the decision was delayed. One paragraph can discuss a yeast plant in India or the impact of high gas prices on sugar-refining margins, while the next jumps to Primark's new "digital flywheel" or the progress of the "By Coleen" collection. Even by conglomerate standards, combining food staples with discount fashion has always been an odd mix.

Why the Primark Demerger Makes Strategic Sense

Separating into two FTSE 100 companies with stand-alone governance is a logical step. It allows each business to focus on its core strengths and pursue distinct strategies without the distractions of a sprawling conglomerate. For Primark, that means sharper digital marketing campaigns, a rejig of ranges, and the introduction of click & collect—initiatives that have already been rolled out in UK stores.

However, the demerger is unlikely to reveal tons of hidden value, which is another common rationale for splitting up conglomerates. Primark is already the group's profit engine, contributing two-thirds of total earnings. It isn't a hidden jewel waiting to be discovered; it's a well-known quantity. And right now, it isn't on sparkling form, particularly in continental Europe.

Primark's European Struggles: A 4.7% Like-for-Like Decline

For the financial year, Primark reported a like-for-like sales decline of 4.7% in continental Europe. That's a jarring figure even in the context of "weak" consumer sentiment across the region. The decline suggests that Primark's value proposition is not resonating as strongly with European shoppers as it does in the UK.

ABF's explanation is that the continental operation is simply a year or so behind the refresh treatment that has been administered on UK stores. That refresh includes sharper digital marketing campaigns, a rejig of product ranges, and the introduction of click & collect services. If the UK experience is any guide, these measures could eventually turn things around. But the question is whether the demerger will distract management at a critical time.

• Demerger timeline: The split is expected by the end of next year, creating two FTSE 100 companies.
• Profit contribution: Primark already accounts for two-thirds of ABF's group profit.
• European weakness: Like-for-like sales in continental Europe fell 4.7% for the financial year.
• Refresh strategy: Digital marketing, range changes, and click & collect are being rolled out in Europe, lagging the UK by about a year.
• Value question: The demerger may not unlock significant hidden value, as Primark is already a major profit driver.

What the Demerger Means for Investors

Investors will be watching closely to see whether the separation creates value or simply adds complexity. On one hand, two focused companies could each command higher valuations as they pursue independent strategies. On the other, the costs of splitting—both financial and managerial—could outweigh the benefits, especially if Primark's European operations continue to struggle.

The Weston family's decision to finally back the demerger suggests they believe the time is right. But the weak sales in continental Europe highlight the risks. If Primark can replicate its UK refresh success across Europe, the demerger could be a catalyst for growth. If not, the split may simply expose the challenges that were previously buried within a conglomerate.

What to Watch Next

The key question is whether Primark can turn around its European operations before the demerger is completed. The company is betting that the refresh strategy will work, but the 4.7% decline shows there is ground to make up. Investors should monitor like-for-like sales trends in the coming quarters for signs of improvement.

Another factor to watch is how the market values the two companies post-split. If Primark trades at a premium as a standalone entity, it could vindicate the Weston family's decision. If it languishes, the demerger may be seen as too little, too late. The background to this story is set out in Business: latest articles.