ii view: Primark owner AB Foods sweetens outlook
28th June 2023 15:38
by Keith Bowman from interactive investor
Share on
Pushing an online offering for Primark and with food brands including Ryvita and Twinings. We assess prospects.
![.](https://media-prod.ii.co.uk/s3fs-public/2023-06/AB%20Foods-sugar-600_0.jpg)
Third-quarter trading update to 27 May
- Retail or Primark revenue up 13% to £2 billion
- Total food related revenues up 18% to £2.73 billion
- Overall group currency adjusted revenue up 16% to £4.73 billion
- Completed £319 million of its £500 million share buyback programme
Guidance:
- Now expects full-year adjusted operating profit to be moderately ahead of last year, up from broadly in line previously
- Learn more: SIPP Portfolio Ideas | How SIPPs Work | Transfer a SIPP
ii round-up:
Associated British Foods (LSE:ABF) operates across the five divisions of grocery, sugar, agriculture, ingredients, and retail.
Its retail business Primark is located in the UK and Ireland, much of Europe and parts of the USA.
Brands for its food businesses include Kingsmill, Ryvita, Allison’s, Twinings, Silver Spoon, Jordans and Dorset cereals, Patak’s, Rajah’s and Blue Dragon.
For a round-up of this latest trading update announced on 26 June, please click here.
ii view:
Founded in 1935, AB Foods is today a multinational food processing and retailing business headquartered in London. Primark competitors include Tesco and Sainsbury's selling their own clothing ranges, and the likes of Next (LSE:NXT) and Marks & Spencer Group (LSE:MKS). Food sector rivals include Premier Foods (LSE:PFD) and Tate & Lyle (LSE:TATE). A constituent of the FTSE 100 index, AB Foods employs over 125,000 people in more than 50 countries. Recently opened Primark stores include Venice in Italy, its first store in Slovakia, and Toledo in Spain.
For investors, the tough economic backdrop including rising interest rates continue to threaten consumer spending. Costs generally for businesses remain elevated, food production such as sugar can prove vulnerable to the weather, while Primark’s lack of a significant online presence over the course of the pandemic contrasts with that of clothing rivals such as Next.
- Sector Screener: a potent mix of growth potential and defensive appeal
- Richard Beddard: my savage derating of this popular FTSE 100 share
- ii view: M&S sparks investor optimism but is it justified?
On the upside, product price rises across the company appear not to have affected volumes, with full-year adjusted profit now expected to be marginally higher than last year. New Primark stores continue to be opened, the company is diversified across both business type and geography, while action is being taken to bolster Primark’s online presence.
On balance, and while the group’s exposure to consumer spending offers room for caution, its relatively defensive offering of food and budget clothing is likely to keep investors happy.
Positives:
- Diversified business type and geographical footprint
- Expanding Primark store numbers
Negatives:
- Uncertain economic outlook
- Many factors outside of its control like food commodity prices and currency moves
The average rating of stock market analysts:
Hold
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.