Shares in Associated British Foods PLC (LSE:ABF) were down 2.4% in morning trading after being downgraded by a leading Wall Street investment bank.
Citi moved to 'sell' on ABF with a price target price of £17.70. It is forecasting a 6% negative expected total return (ETR).
Citi’s analysis projects earnings per share (EPS) for fiscal years 2025 and 2026 to be 4% and 15% below Visible Alpha consensus estimates, driven by challenges at Primark and in the conglomerate's UK food divisions.
Analysts also expressed caution regarding Primark's sales outlook, predicting declines of 4% and 7% below consensus in 2025 and 2026.
Concerns stem from limited space growth and softening like-for-like (LFL) sales, as data suggests Primark’s value positioning may be vulnerable to competition from online discounters and resale platforms.
Additionally, Citi highlighted a potential 170 basis point gross margin drag in FY26, driven by US dollar strength.
In the UK food sector, which represents 33% of ABF's total food business, Citi said it foresees risks to growth and pricing power as inflation accelerates in 2025.
The stock was off 47.5p at 1,936p.