ABF is down 1.5% as upgrades fail to follow Primark’s strong Christmas

– Primark saw ‘very strong’ festive sales – Associated British Foods delivers double-digit growth across the board – Conglomerate maintains full year guidance

Foods-to-fashion conglomerate Associated British Foods (ABF) reported a ‘very strong Christmas period’ for Primark, the jewel in its crown, as the discount clothing chain Primark bucked the cost-of-living squeeze in the UK. However, the shares cheapened 1.5% to GBP18.41 on profit-taking after a good run and the absence of upgrades, while Associated British Foods also warned tough economic conditions could ‘weigh on consumer spending in the months ahead’. The FTSE 100 group left guidance for the year to September 2023 unchanged as it reported sales growth across the board in the early weeks of the financial year, with shoppers proving more resilient than feared and inflationary pressures easing.

In the 16 weeks to 7 January 2023, group revenue surged 20% year-on-year to GBP6.7 billion and Associated British Foods expects to deliver ‘significant’ annual sales growth, albeit with lower adjusted operating profit and adjusted earnings per share. PRIMARK PROVIDES CHRISTMAS CHEER Primark’s revenue was 18% higher at GBP3.15 billion in the first quarter as sales in the week leading up to Christmas Day ‘reached a new record’, said Associated British Foods.

The budget clothing chain had ‘a very strong Christmas period’, said the company. ‘We believe our proposition of great quality at affordable prices and attractive store experience is proving increasingly appealing to both existing and new customers. Early trading in this new calendar year has been encouraging but macro-economic headwinds remain and may weigh on consumer spending in the months ahead.’ Primark’s like-for-like sales were 11% ahead year-on-year, driven by volume growth as well as higher prices and a well-controlled level of markdowns.

Encouragingly, Associated British Foods said that footfall is now ‘strong in major city centres as well as on high streets and retail parks’. FOOD SALES FATTEN UP 23%

Aggregate revenue from the group’s food businesses, which include brands such as Twinings-Ovaltine, Blue Dragon and Kingsmill, was 23% higher at almost GBP3.6 billion in the first quarter, thanks to price rises to recover cost inflation and higher sugar prices. ‘Input cost inflation is becoming less volatile and recently some commodity costs have declined,’ explained Associated British Foods. ‘However, all our businesses continue to work hard to restore margins which have been and remain under pressure.’ THE EXPERT’S VIEW

Russ Mould, investment director at AJ Bell, said that while Associated British Foods failed to produce any upgrades, the mood around the company is one of optimism. ‘Talk of resilient consumer demand and inflationary pressures settling is telling and its Primark retail chain had a good Christmas. ‘Its reliance on physical stores meant the pandemic was a big issue for Primark and a festive period without restrictions clearly helped get shoppers through the doors.’

Mould added: ‘The fact this has not resulted in a change in guidance reflects continuing pressures on margins across all parts of the group which may have proved a bit of a disappointment to investors. ‘Having avoided any meaningful web-based presence for so long, Primark is stepping up its click and collect trials. There’s logic to this approach as it allows Primark to benefit from impulse purchases as customers are still visiting the stores and avoids incurring big costs around delivery and returns of what tend to be very cheaply priced products.’

Mould explained that Primark’s budget proposition could help it secure new customers as cost-of-living pressures bite, ‘particularly in areas like children’s clothes where parents make frequent purchases and the longevity of what they buy might be less of a consideration’.

Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine.

The author of the article (James Crux) and the editor of the article (Tom Sieber) own shares in AJ Bell.

Issue Date: 24 Jan 2023    

Tags:

apple-store-gb listed on couponmatrix.ukattractiontix listed on couponmatrix.ukcar-parts-4-less listed on couponmatrix.ukkeytours listed on couponmatrix.ukliberty listed on couponmatrix.ukroov listed on couponmatrix.uk
apple-store-gb listed on couponmatrix.ukWhether you’re an Apple old-hand or just dipping your toe into the world of iPhones and Macs, Apple is constantly revolutionising its product lines and you’ll love the newly developed smartphones, computers and gadgets all featuring signature Apple features. With an Apple voucher from us, you’ll be able to update your handset and upgrade your home office without breaking the bank, so what are you waiting for?
attractiontix listed on couponmatrix.ukAttractionTix are one of the most trusted suppliers for tickets to the best attractions, theme parks and tours all over the world. Offering advance tickets that can get you into attractions quicker and easier, AttractionTix offer exclusive UK packages that just aren't available with other suppliers. So why not use an AttractionTix discount code and select your perfect ticketed treat or day out?
car-parts-4-less listed on couponmatrix.ukSteer into the fast lane to savings with CarParts4Less, the largest online vehicle parts supplier in the UK and give your motor the attention it deserves. Snap up a CarParts4Less discount code from us to invest in high-quality engine parts, spark plugs, lubricants and more, without letting costs veer out of control. Whether you’re hoping to work on your trusty Ford’s brakes or switch up your Audi’s engine, look no further than CarParts4Less.
keytours listed on couponmatrix.ukLovers of classical culture, sun, sand and Mediterranean meze can let the good times roll, with a helping hand from Keytours discount codes. The tour guide company specialises in aiding visitors to Greece in experiencing Greek culture and exploring the country’s rich past and present. Groupon wants to pitch in, helping you to get away with Keytours promo codes. Keytours has a comprehensive range of tours across Greece to satisfy travellers of every variety, from history buffs to those after a relaxing retreat. One thing all customers have in common is that they can save money with Keytours promo codes, whatever the reason they are visiting. History is probably Greece’s biggest asset, with hundreds of famous ruins from the ancient world, such as the glorious Acropolis in Athens, that can be seen on Keytours’ excursions. Ruins, museums and places of historical interest aren't limited to the capital – they can be found across the entire country, including on its numerous islands. As well as cultural tours, the company also offer the chance to engage in activities. Customers can go scuba diving, sea kayaking, explore beaches and take geological tours of islands such as Milos, Rhodes and Kos. Fancy a spot of sun, sand and sea? Why not use Keytours voucher codes and discover a culture and country filled with thousands of years of civilisation. Whether you fancy Athens, Corinth, Mykonos or Kos, Groupon can help you explore Greece with Keytours discount codes.
liberty listed on couponmatrix.ukDiscover the sumptuous fabrics, designer clothing and elegant homeware offered by Liberty, and add the luxe touch to your space, wardrobe and life. Snap up a Liberty discount code from us to shop all the fashion, beauty and gifts this iconic British department store has to offer and enjoy a guilt-free spree without busting your budget. Established on London’ Regent Street since 1875, when you treat yourself to the high quality wares from Liberty, you can trust in their capable, expert hands.
roov listed on couponmatrix.ukRoov is your go-to for affordable homewares and accessories. Whether you’re looking to kit out your kitchen, transform your garden or pick out the perfect present, you’ve come to the right place—make the most of a Roov discount code and you’ll bag a bargain on top quality brands. From practical storage solutions to cute novelty gifts, Roov has an awesome range at even better prices—jump online to discover a bargain today!