Can Primark become the next Zara without online sales? What ABF’s digital-lite strategy reveals

Shares of Associated British Foods plc (LSE: ABF) jumped over 6 percent on Tuesday after the group reported strong growth across its diversified business segments and hinted at a possible structural separation of its fashion retail chain Primark. While the idea of spinning off Primark is still under review, the statement confirms that leadership is evaluating the long-term implications of running a high-margin retail business alongside its more cyclical food, ingredients, and agriculture divisions.

Primark’s performance in fiscal year 2025 (52 weeks ending September 14) was nothing short of commanding. Revenues rose 15 percent to £9.0 billion, while adjusted operating profit surged 44 percent to £735 million, marking a margin recovery to 8.2 percent from just 6.5 percent in the prior year. But what surprised many was that this growth came with virtually no contribution from e-commerce, setting up the broader question: Can Primark keep pace with Zara, H&M, or Shein—without going full digital?

How is Primark’s performance shaping separation talks—and how serious is ABF about a spinoff?

In its FY25 results, Associated British Foods plc confirmed that discussions are actively underway on how best to structure the group for long-term value creation, including “separation options” for Primark. While no decisions have been made, the fact that a strategic review is underway signals mounting internal interest in allowing Primark to operate with greater independence.

Chairman Michael McLintock noted in the statement that “it is right that we examine all options to create long-term value,” adding that such work will be “rigorous and thorough.” Analysts see this as a notable pivot. Until now, ABF had largely deflected investor pressure to split its food and retail businesses, instead highlighting diversification as a hedge. The new tone suggests a mindset shift.

For context, Primark has now become ABF’s largest and most profitable division by revenue and operating income. It’s not only recovering post-pandemic, but also benefiting from scale-driven efficiencies, especially in logistics and sourcing, which the group says are driving margin improvement faster than anticipated.

Why is Primark still resisting full e-commerce—and is its digital-lite model working?

One of the most discussed elements in the FY25 announcement was Primark’s performance in the absence of a full e-commerce platform. While many fashion retailers have pivoted aggressively to omnichannel sales models, Primark continues to focus primarily on in-store footfall, supported by localized click-and-collect pilots in the UK and some digital catalog features.

Associated British Foods plc reiterated its belief that Primark’s value-based pricing model is better protected in-store, where basket sizes and conversion rates are more predictable and less margin-dilutive than online. That said, the company is not entirely ignoring digital. Primark’s website traffic rose 40 percent year-on-year, and its improved product navigation features are now live in all 16 international markets.

In the UK, where Primark has over 190 stores, the click-and-collect service has expanded to 208 locations. According to the company, the trial is working well and has helped boost footfall. But full online fulfillment remains off the table. This restraint continues to polarize investor sentiment—some see it as brand discipline, while others argue it risks leaving money on the table.

How did ABF’s other segments perform in FY25—and what macro trends are driving FY26 guidance?

Primark may be grabbing headlines, but the underlying performance across ABF’s food and ingredients divisions was equally robust. Total group revenue climbed 15 percent to £19.8 billion, and adjusted operating profit rose 31 percent to £1.8 billion, with margin improvement reported across all segments.

The Grocery division, which includes brands such as Twinings, Ovaltine, Jordans, and Ryvita, delivered revenue of £4.5 billion and operating profit of £430 million. Strong performances from George Weston Foods in Australia and ACH Food Companies in North America contributed to margin gains. Twinings Ovaltine, in particular, benefited from demand normalization in China and steady expansion in Southeast Asia.

The Ingredients division saw revenues of £2.3 billion with adjusted operating profit rising to £221 million. ABF Ingredients, which includes enzymes and specialty proteins, delivered record margins driven by pricing discipline and growth in health-related formulations.

Meanwhile, Agriculture recorded £1.9 billion in revenue and £48 million in profit, despite a mixed backdrop for global feed commodities. AB Agri continues to scale its animal nutrition and digital traceability offerings, especially in Europe and China.

In Sugar, revenues rose 18 percent to £2.7 billion and profit nearly doubled to £162 million, supported by strong volumes and better market conditions in Europe and Africa. British Sugar benefited from improved factory operations and enhanced beet yields.

Looking ahead, Associated British Foods plc expects moderate growth across most divisions in FY26, with a cautious note on input cost volatility and currency fluctuations, particularly given the uncertain macroeconomic outlook in some key markets.

What are institutional investors focused on following the FY25 results—and how are they reading the Primark angle?

Market reaction to the FY25 results was clearly positive, with shares of Associated British Foods plc rising as investors digested the prospect of a leaner, more focused structure. Analysts at Barclays and UBS flagged the potential separation of Primark as a “value unlock,” especially if it allows the group to highlight the distinct growth profile of its fashion retail business.

Some institutional investors are also interpreting the spinoff talk as a signal that ABF might finally be acknowledging the valuation gap between it and more streamlined peers. At the moment, the group trades at a discount relative to fashion-forward competitors like Inditex and H&M, largely due to its conglomerate structure.

There’s also a growing debate around capital allocation. If Primark were to be separated, investors believe it could access capital markets more directly to fund international expansion or even invest in a controlled e-commerce rollout—something that might remain constrained under ABF’s more conservative governance framework.

What is the strategic logic behind ABF’s continued diversified model—and could it change post-Primark?

Chief Executive George Weston has long defended the diversified model of Associated British Foods plc as a strength, allowing the group to ride out downturns in one sector with strength in another. FY25 results seem to support that logic. But with Primark’s retail margins returning to pre-pandemic levels and other divisions showing more moderate growth, the structural debate is gaining urgency.

Even if Primark is not immediately spun off, investors are watching for signs of operational decoupling—whether in capital budgeting, governance, or leadership structures. There is already speculation that Primark could operate under a standalone leadership team or report its financials with more granular segmentation.

In the broader context, a potential Primark separation could follow the pattern seen in other European conglomerates, where simplification and sharper business focus have become the norm amid activist investor pressure and market demand for capital efficiency.

Key takeaways from Associated British Foods plc FY25 results and strategic review

• Associated British Foods plc (LSE: ABF) reported FY25 revenue of £19.8 billion and adjusted operating profit of £1.8 billion, up 31 percent year-on-year.
• Primark delivered £9.0 billion in revenue and £735 million in adjusted profit, with operating margins improving to 8.2 percent.
• Group margin recovery was driven by supply chain efficiency, normalized input costs, and improved logistics performance.
• A strategic review is underway to evaluate long-term value creation options, including a possible separation of Primark.
• Primark continues to resist full e-commerce adoption but is expanding its click-and-collect and digital catalog capabilities in key markets.
• Grocery, Sugar, Ingredients, and Agriculture segments all showed revenue and margin growth, reinforcing the benefits of ABF’s diversified model.
• Institutional investors are focusing on capital allocation, valuation gaps, and whether Primark could operate more efficiently as a standalone entity.
• FY26 guidance includes cautious optimism amid global macroeconomic uncertainty and commodity price sensitivity.