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:

antler listed on couponmatrix.ukbrittany-ferries listed on couponmatrix.ukeve-lom listed on couponmatrix.uksimply-be listed on couponmatrix.uksosander listed on couponmatrix.uktommee-tippee listed on couponmatrix.uk
antler listed on couponmatrix.ukAntler has over 100 years of experience creating luxury British luggage. Whether you’re commuting to the office or touring the globe, Antler’s premium-quality suitcases and bags allow you to travel in style. These suitcases are so well-made, each comes with a lifetime warranty that covers a life’s worth of adventures. Add an Antler discount code to your basket for top savings on Britain’s best-loved luggage. We’re always on your side at Groupon, helping you enjoy a little luxury for less.
brittany-ferries listed on couponmatrix.ukLove to travel but hate to fly? With Brittany Ferries your next holiday destination in France or Spain is closer than you think. Sail in style with your Brittany Ferries discount code with a huge number of gorgeous ships setting sail from Portsmouth, Plymouth and Poole. Whether you want to relax in an overnight cabin or take advantage of their Fast-Craft Crossings, you can reach your dream European destination without spending hours on the road thanks to Brittany Ferries.
eve-lom listed on couponmatrix.ukPurify, nurture and restore with Eve Lom skincare – designed by trade professionals for phenomenal, fast-acting treatment. With an ethos which derives that truly radiant skin starts with a proper cleanse, give their signature cleansers a try for a fraction of the price with an Eve Lom discount code from Groupon. Offering an array of morning masks, moisturisers, creams and balms to keep your skin feeling soft and soothed without fail, start your skincare revival with the help of Eve Lom today.
simply-be listed on couponmatrix.ukCalling all girls with curves! Find your fashion fix with high street favourite Simply Be. Flaunt your signature style with zero limits thanks to a Simply Be discount code from us. We’ll make your spending a rewarding experience and your debit card will thank you later! Whether you’re hitting the treadmill or bundling up for a work do, Simply Be has got you covered – and we'll help you save on your shop.
sosander listed on couponmatrix.ukReinvent your wardrobe with Sosandar, the brainchild of two talented women designers with one clear goal – to make immaculate clothing by women, for women. Regardless of if you want to strut your stuff during a night out or simply look elegant in the office, a Sosandar discount code is all you need to make your goals a reality for a fraction of the price.
tommee-tippee listed on couponmatrix.ukParenting isn’t the easiest job in the world, but you’ll be a pro in no time with Tommee Tippee. Tommee Tippee has over 50 years of expertise in feeding products like bottles, pumps and cups to make mealtimes more comfortable for parents and babies alike, and with expert solutions to sterilise equipment on the go, you’ll be fully kitted out like the superhero you are. A Tommee Tippee discount code from Groupon could go a long way towards making products like the Tommee Tippee bottle warmer more affordable, so check back here and shop for baby products that make life a little easier.