After an almost 40% recovery in its share price over the past three months, Associated British Foods (LON: ABF) is reporting its trading update on Tuesday, but what can investors expect?
The stock struggled significantly in 2022, as did many UK retailers as firms battled soaring inflation and mounting macroeconomic issues. But over the last three months, the signs have been more.
Primark owner ABF is predicted to have a strong December as consumers spent well over the Christmas period. Many brands have already reported strong sales growth as UK consumer spending has been resilient, although retail sales did surprisingly miss in December.
Even so, ABF’s fast fashion brand and cheaper alternatives, such as Primark, will likely resonate well with customers.
In addition, the group’s grocery brands are expected to benefit from higher inflation, as consumers spent more on food brands.
Although many shoppers may have made a switch to cheaper supermarket owned brands, it is expected that several shoppers remained loyal to their favourite brands, especially over the Christmas period (Sainsbury’s recently stated more customers shopped early for festive treats.)
The group reported in its most recent results in November, that their outlook remains unchanged. ABF does anticipate adjusted operating profit and earnings per share to be lower than the financial year just closed.
According to Citigroup analysts, a strong December in the UK should boost Primark sales by 15%, driven by non-discretionary spending and pent-up demand. The investment bank also thinks that based on a Covid/Omicron comparison, its performance overseas should be stronger.
Elsewhere, AB Foods was upgraded to Outperform from Neutral at Exane BNP Paribas at the beginning of January. Analyst Warwick Okines kept a 1,875p price target on its shares.