AB Foods shares rise as Primark owner raises profit forecast
- The FTSE 100 company increased its profit margin on strong performance in the retail and food sectors
Shares in Primark owner Associated British Foods jumped after the company raised its full-year profit outlook for the second time in four months.
The FTSE 100-listed company now expects its full-year adjusted operating profit to be “somewhat better” than its previous expectations, namely “moderately above” last year’s profit of around £1.44 billion.
ABF said the upgrade was primarily due to the strong performance of both the Primark clothing business and the grocery business.
The FTSE 100 company increased its profit margins mainly due to strong performance from both its Primark clothing business and its grocery business
Shares in Associated British Foods rose 6.20 per cent to 2,125.00 pence in morning trade on Tuesday.
London-based Rhe said full-year retail sales are expected to be around 9 billion pounds, up 15 percent year-on-year, with like-for-like sales growth of 9 percent.
The company also forecast strong fourth-quarter sales growth of 15 percent and like-for-like growth of 8 percent.
The group attributed the strong sales growth to “selective price increases, well-received ranges and strong new stores”.
Regarding food, AB added: “We continue to see strong sales growth, particularly in food and ingredients, and slightly better than expected performance in sugar.”
As a result, the company now expects its adjusted operating profit to be “significantly higher than the previous fiscal year.”
However, ABF warned that its adjusted operating profit margin would be “just under 8 percent” in the second half of the year and around 8 percent for the full financial year.
The company also said it expects Primark’s adjusted profit margin to “recover significantly in the next financial year”.
Sophie Lund-Yates, senior equity analyst at Hargreaves Lansdown, said: “Not all retailers are created equal.” The group’s clever model means starting with bargain prices offers more scope to drive up prices before consumers buy in be deterred in this very difficult economic climate.
“The cost of living crisis hasn’t stopped customers from flocking to new stores, which is in direct contradiction to the fate of many other major brick-and-mortar retailers who are closing their doors – rather than opening new ones.”
“For all of this to be possible, Primark needs to put a laser focus on its range and ensure it offers exactly what people want – there is no room for wasted space on hangers.” “This seems to be executed almost perfectly and is also supported by Primark’s digital pivot.”
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