Associated British Foods Plc (ABF) said its Primark budget fashion chain will open its first stores in the US, driving growth at the unit that will help the company post similar annual earnings to 2013.
Retail profit at the business will be “well ahead” of last year’s, helping offset declines at AB Foods’ sugar business, the London-based company said today in a statement, as it reported little changed first-half adjusted operating profit of £497 million because of falling sugar prices.
That was in line with analysts’ estimates.
Primark, which has overtaken sugar as the biggest contributor to profit, is adding stores in the north east of the US, the first of which will open at the end of 2015. It’s also expanding across Europe and opened its fourth in France on April 9. The unit’s growth is helping offset slumping sugar earnings caused by pressure on prices amid accelerating imports from outside the European Union.
“Lower sugar prices will result, as previously indicated, in a substantial reduction in profit from sugar this year and the current strength of sterling, if maintained, will have a greater impact on translation of overseas results in the second half,” Chairman Charles Sinclair said in the statement.
AB Foods shares have dropped 9.1% since Feb. 24 when the company provided an update before the end of the half-year reporting period. They gained 56% last year.
The “recent stock performance has highlighted that ABF is not totally immune to weakness in the non-Primark business,” Andrew Wood, an analyst at Sanford C. Bernstein, said in a note released prior to today’s results. The first half “should be a reminder of the issues that ABF faces away from Primark.”
Bloomberg
