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AB Foods Sees First Half 'Strongly Ahead' On Improved Primark

Associated British Foods on Monday forecast first-half sales and adjusted operating profit 'strongly ahead' of the previous year and ahead of pre-COVID 19 levels, reflecting an improved performance from its Primark fashion business.

Primark sales for the 24 weeks to 5 March were expected to be well over 60% ahead of last year at constant currency with an operating profit margin of 11%.

The better outcome reflected all Primark stores remaining open and trading throughout the period except for short periods in Austria and The Netherlands.

Inflation Impact 

AB Foods said the effect of inflation on raw materials and the supply chain in Primark in the first half was broadly mitigated by a reduction in store operating costs and overheads and a favourable U.S. dollar exchange rate. It said in January it would not raise prices for spring/summer.

The group also owns major sugar, grocery, ingredients and agricultural businesses.

It said all its food businesses had experienced increasing inflationary pressures in raw materials, commodities, supply chain and energy.

Offset Higher Costs 

It has taken steps to offset these higher input costs through operational cost savings and where necessary in grocery, ingredients and agriculture, the implementation of price increases.

However, it cautioned that actions on price inevitably lag input cost inflation.

As a result, it expects some margin reduction in these three businesses at the half year but expects a recovery by the financial year-end.

Looking Ahead

AB Foods' grocery brands include Twinings tea, Jordans cereals, Kingsmill bread and Ovaltine drinks.

The group expects further growth in profit at AB Sugar at the half year.

AB Foods outlook for the full year was unchanged with 'significant progress' expected in both adjusted operating profit and adjusted earnings per share.

News by Reuters, edited by Donna Ahern, Checkout. For more retail stories, click here. Click subscribe to sign up for the Checkout print edition.

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