Primark Continues To Trade Well Ahead of Interim Results

Primark owner Associated British Foods (ABF) is set to report its interim results on Tuesday, following on from a upbeat trading update back in February.

ABF’s shares have rallied 26% so far this year and been extremely bullish since hitting its 10 year low back in October. However, its shares are still far below pre-pandemic levels, so what should investors expect ahead of its results.

In its prior trading update for the half year, ABF stated it expects total sales to be more than 20% ahead of last year despite the cost-of-living crisis causing people to switch from branded goods. Additionally, adjusted operating profit is expected to be broadly in line with the same period in the prior year.

So far, consumer spending has been able to hold up much better than expected, but the group has encountered significant cost pressures which has impacted profits.

However, cost mitigations and price increases have helped its food businesses, with brands such as Kingsmill, Twinnings, Blue Dragon and many more remaining stable during the high-inflationary environment.

As for Primark, the group reported it had traded very well for the half year, with sales up 19% as it continues to be the standout performer for ABF. With UK inflation currently at 10.1%, it is likely Primark will continue to benefit from consumers switching to cheaper non-essential items such as clothing.

According to Tipranks, the current analyst consensus is a Moderate Buy for ABF and a average price target of 2,180p.

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