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The Related British Meals (LSE: ABF) share worth has slumped round 11% in early buying and selling at the moment (8 January), after the FTSE 100 group launched a disappointing Christmas buying and selling replace.
Whereas particular person firm points are clearly at play, I see this as greater than only a stock-specific wobble. For me, it raises an uncomfortable query: is the struggling client beginning to pose a wider menace to markets as we head into 2026?
A troublesome festive interval
The replace coated the 16 weeks to three January – an important buying and selling window for retailers. Primark, which accounts for roughly half of group revenues, delivered a combined efficiency.
Within the UK, gross sales rose round 3%, with like-for-like progress of 1.7% and a few market share positive factors. Administration pointed to stronger womenswear efficiency and continued funding in worth notion and Click on & Acquire.
Elsewhere, efficiency deteriorated. Like-for-like gross sales in continental Europe fell 5.7%, whereas unstable US buying and selling dragged total Primark progress beneath expectations, prompting greater markdowns and weaker profitability.
Wanting forward, administration now expects Primark gross sales progress within the first half of 2026 to be within the low single digits, with working margins round 10%. That’s hardly inspiring for a enterprise that many traders hoped would thrive throughout a cost-of-living disaster.
Meals companies really feel the pinch too
What issues me extra is that the patron squeeze isn’t confined to retail. ABF’s Meals divisions additionally skilled combined buying and selling, notably within the US, the place demand weakened extra sharply than anticipated.
In each Grocery and Components, the corporate now expects adjusted working revenue to come back in reasonably beneath final 12 months’s stage. That’s a notable downgrade, particularly given the defensive popularity many meals manufacturers take pleasure in. It suggests households have gotten extra selective even on the subject of on a regular basis staples.
At group stage, the image is uninspiring. Income for the interval fell 1% at fixed forex, and administration now expects group adjusted working revenue and earnings per share to be decrease 12 months on 12 months.
A warning sign for 2026?
Some retailers, together with Tesco and Marks & Spencer, reported sturdy Christmas buying and selling. Nonetheless, I don’t see this as proof of a wholesome client. As an alternative, it highlights how polarised spending has grow to be, with consumers prioritising necessities and trusted manufacturers, whereas discretionary spend stays underneath strain.
I’ve lengthy seen ABF as one thing of a bellwether for the patron economic system. It straddles worth style and on a regular basis meals – areas that ought to, in idea, be resilient when occasions are powerful. The truth that each side of the enterprise are underneath strain is telling.
Shoppers should still be spending, however they’re clearly spending much less and turning into more and more cautious. That’s not only a problem for retailers because it has implications for earnings progress throughout giant swathes of the market.
My view as a shareholder
I personal ABF shares and intend to carry them. It stays a well-run, conservatively-managed enterprise with sturdy manufacturers and long-term potential. Nonetheless, regardless of the steep fall within the share worth, I’m not tempted to purchase extra.
The replace reinforces my perception that the patron is stretched and that visibility for 2026 stays poor. Till there are clearer indicators of a significant restoration in demand, I’m blissful to sit down on my fingers – and preserve a detailed eye on what ABF may be telling us concerning the wider market
