Not even value retailers are escaping weakness on the high street as shoppers tighten their pursestrings. This was underlined by Associated British Foods (LSE:ABF) on Tuesday (29 April), whose shares have tanked amid news of disappointing retail revenues.
At £20.60 a share, the share price was last 8% lower in daily trading. More trouble could be in store as ‘Trump Tariffs’ and reactive policy from US trading partners impacts its Primark division.
However, I’m wondering if the bad news is now baked into the cheapness of ABF shares. In fact, I’m considering whether the company could now be one of the FTSE 100‘s most attractive value shares to consider.
Let’s take a look.
Not so sweet
At group level, revenues fell 2% to £9.5bn in the 24 weeks to 1 March, ABF said. Adjusted operating profit, meanwhile, tanked 12% to £835m.
ABF is a sprawling business that manufactures and/or sells clothing, sugar, food ingredients, agricultural products, and popular consumer food brands (like Kingsmill bread and Twinings tea). While such diversification helps it better absorb certain trading issues, trouble at the first two divisions have outweighed robustness elsewhere in recent months.
Weak sugar prices pulled divisional revenues 6% lower, to £1.1bn, and saw the unit swing to an adjusted operating loss of £16m from a £125m profit a year earlier.
However, continued pressure at Primark (accounting for 47% of group revenues) is what really spooked the market. Sales here dropped 1% in the first half to £4.5bn, as turnover across its important UK and Ireland stores fell by 4%.
Once again, Primark’s stores in the US and Mainland Europe — where the business is rapidly expanding — helped to offset weakness here. Sales increases outside its home markets meant divisional adjusted operating profit rose 6%, to £540m.
But ABF warned that things could get much tougher. It said that “cautious” shopper sentiment “is unlikely to improve as markets continue to face uncertainty and instability following recent tariff announcements by the US, retaliatory actions by China and the risk of further tariff trade wars.” It added that confidence could fall further as recessionary risks increase.
Should I buy the shares?
In this climate, investors should expect further turbulence for Associated British Foods and its share price. Yet as a long-term investor, I’m considering whether now could be a good time to buy in.
As I alluded to earlier, its shares look pretty attractive from a value perspective. Today’s plunge leaves the company trading on a price-to-earnings (P/E) ratio of 11.3 times for this financial year (to September 2025). This is far below the company’s five-year average of just below 18 times.
ABF shares also offer a healthy 3.3% dividend yield as an added sweetener, it’s above the five-year average of 2.2%.
Trade tariffs could have a huge impact on Primark’s sales and costs going forward. But on balance, the outlook for ABF’s retail division remains a compelling one for me.
The value retail market still has room for considerable long-term growth, according to analysts. And Primark’s expansion in hot overseas markets (like the US, and Central and Eastern Europe) puts it in great shape to exploit this opportunity.
On balance, I think ABF shares are worth serious consideration right now.
