AB Foods shares soar as Primark owner raises profit forecast
- FTSE 100 company increased profit margin due to strong performance in retail and food
Shares in Primark owner Associated British Foods soared after the company raised its full-year profit outlook for the second time in four months.
The FTSE 100 company now expects full-year adjusted operating profit to be “slightly better” than its previous expectations of “moderately ahead” of last year’s profit of around £1.44bn.
ABF said the improvement was mainly due to the strong performance of both its Primark clothing business and its food operations.
The FTSE 100 company increased its profit margins mainly due to strong performance from both its Primark clothing business and its food operations.
Associated British Foods shares soared 6.20 per cent to 2,125.00 pence in morning trading on Tuesday.
The London-based company said full-year retail sales are expected to reach around £9 billion, up 15 per cent on last year, with like-for-like sales growth of 9 per cent.
The company also predicted strong sales growth in the fourth quarter, which it expects to be 15 percent with comparable growth of 8 percent.
The group attributed the strong sales growth to “selective price increases, well-received ranges and well-performing new stores”.
In terms of foods, AB added: “We continue to see strong sales growth, particularly in groceries and ingredients, and a slightly better than expected performance in sugar.”
As a result, the company said it now believes its adjusted operating profit will be “well ahead of the previous financial year.”
But ABF warned that it expects adjusted operating profit margin in the second half to be “slightly below 8 percent and for the full financial year around 8 percent.”
It also revealed that it expects Primark’s adjusted profit margin to “recover strongly in the next financial year”.
Sophie Lund-Yates, senior equity analyst at Hargreaves Lansdown, said: ‘Not all retailers are the same. The group’s clever model means that starting with bargain prices allows more room to inflate prices before discouraging consumers in this difficult economic climate.
‘The cost of living crisis has also not stopped customers from flocking to new stores, which is a direct contradiction to the fortunes of many other large physical retailers who are closing their doors, not opening new ones.
“To make all this possible, Primark must focus on its ranges and ensure it offers exactly what people want – there is no room for wasted hanger space. “This looks like it is being executed almost perfectly and is also supported by Primark’s digital pivot.”
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