Primark owner ABF shrugs off inflation concerns to report strong trading result
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Primark sales are up as Associated British Foods surges on price hikes and record demand over the Christmas period
- ABF’s turnover increased by 16% to £6.7 billion in the 20 weeks ended January 7
- Solid sales growth was achieved in all its food and retail activities
- In addition to Primark, the company owns the Ryvita, Kingsmill and Twinings brands
Associated British Foods revenues rose in the final weeks of 2022 and strong demand and price increases helped offset a more difficult economic situation.
The Primark owner’s turnover rose 16 per cent on a constant currency basis to £6.7 billion in the 20 weeks ended January 7, with solid growth across all of its food and retail businesses.
Primark sales beat expectations after record demand in the week leading up to Christmas Day and higher average sales prices. Growth was also flattered by Covid-related restrictions in place last year.
Primark benefited from the reopening of stores, but said the ping epidemic is now affecting sales
UK trade was boosted by the increase in traffic at prominent city center shops, more normalized price reductions and the expansion of the retailer’s share of the clothing, footwear and accessories market.
Within Europe and the US, sales were supported by the opening of new stores in cities such as New York, Naples and the Romanian capital Bucharest.
The retailer’s adjusted operating profit margin was better than expected, but remains below 2019 levels, due to rising labor and energy costs, freight rates and a rising US dollar.
Primark does not intend to make further price increases than those already planned until next summer to ensure that its products remain affordable.
Still, ABF warned that the current economic problems could weigh on consumer spending in the coming months.
Inflationary pressures continue to affect the food business of the FTSE 100 group, but noted that some raw material costs had fallen while other input costs were offset by price increases, especially in the food segments.
The sugar business saw the biggest increase in sales, rising by more than a quarter to £795 million, despite UK production being impacted by bad weather as it benefited from rising prices for sugar and by-products in Europe and Africa.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: ‘One of ABF’s key strengths is its diversified business portfolio, which includes many well-known food brands such as Kingsmill, Ryvita and Twinings.
“This diversification helps to reduce risk and ensures that the company is not overly dependent on any one product.”
The London-based company nevertheless forecasts total adjusted operating income and adjusted earnings per share to be lower this year, despite substantial sales growth.
Associated British Foods Shares fell 1.55 percent to 1,840.5 pence during late morning Tuesday, though their value has still grown by about 37 percent over the past three months.