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Associated British Foods Trading Update – What The Analysts Said

Associated British Foods has said in a trading update that it expects revenue and profit in its Grocery, Sugar, Agriculture and Ingredients businesses in the first half to be ahead of last year, however its Primark arm is expected to lose sales worth £1.1 billion (€1.27 billion) in the period.

'As a consequence of the restrictions placed on Primark we expect sales, adjusted operating profit and adjusted earnings per share for the group to be lower than last year,' the group said.

Here's how leading industry analysts viewed its performance.

Russ Mould AJ Bell

“The company’s update is very good under the circumstances with food, ingredients and agriculture sales and profits ahead of expectations and the Primark retail division showing remarkable resilience for the periods when its shops were open.

“While Associated British Foods has stood out like a sore thumb in the retail sector for refusing to sell its clothes online due to concerns about the economics, one cannot fault the business for also sticking to its guns and maintaining a conglomerate status when so many people said there were merits to spinning off Primark.

“During the pandemic it has enjoyed diverse sources of revenue which have helped prop up the business when one part has been struck by significant operating challenges. The important point to note in its latest update and in previous ones is that consumers are quick to return to Primark shops as soon as lockdown measures are lifted.

“Even though lots of people have been buying clothes online during the pandemic, it is fair to suggest that there is still pent-up demand for going into shops to touch and feel items. In Primark’s case, it could easily see a big rush of customers looking to restock their wardrobes with cheap items, particularly if they’ve put on a few pounds snacking during lockdown and they need to go up a size.”

Katy Hutchinson, Davy

"Unsurprisingly, store closures and ongoing trading restrictions across the Primark estate have prompted management to lower its group sales and profit guidance for FY 2021. Primark now expects over 80% of its selling space to reopen by end-April.

"Primark remains a best-in-class operator with a highly cash generative model. We anticipate no material changes to our FY 2022 estimates."

Pippa Stephens, GlobalData

"As the retailer continues to resist introducing a transactional website to its operations, despite consumers’ rapid shift to purchasing fashion online during the pandemic, its strong presence in international markets outside of the UK has provided a lifeline during these trying times.

"Stores in several of its EU markets are still trading, albeit with some reduced opening hours, while performance in the US has also been promising, aiding its adjusted operating profit to reach slightly above break-even for the period. As well as the gradual reopening of its remaining estate during the next couple of months, Primark also still plans to add nine more stores to its portfolio in H2, following the six that opened in H1.

"The retailer has reported high demand in markets where stores have reopened, with sales ahead of last year on a like-for-like basis in some countries, boding well for these new store openings since the rollout of the vaccine will only see things improve even further going forward.

"Following the UK government’s recent announcement outlining the country’s roadmap out of COVID-19, retailers are now able to make more informed decisions about their future ranges. While Primark reported strong sales for nightwear and loungewear in H1, demand in the second half is likely to experience a rapid shift towards more trend-led products, such as day dresses and blouses, as the opening of UK retail synchronises with outdoor hospitality, with hope instilled for a return to normality as quickly as June.”

Darren Shirley, Shore Capital

"In a H1 2021 period end trading update, it is no surprise that Associated British Foods’ (‘ABF’) has confirmed its Primark estate continues to be very negatively impacted by Covid19 pandemic restrictions across its geographies. However, we are encouraged that sales and profits across all the Group’s food activities are ahead yoy and above expectations.

"We remain positive on ABF equity for the medium to long-term with the potent Primark format set to bounce back strongly whilst it continues to be well positioned to take share across most of its markets, furthermore, the Group continues to build positive momentum across all its all food activities.

"ABF has shown remarkable agility and resilience through the pandemic and its excellent cash generative traits and strong balance sheet leave the Group very well placed for the future."

© 2021 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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