AB Foods shares fall on slide in Primark sales

RELATED QUOTES

SymbolPriceChange
IVKA.F6.051+0.158

Associated British Foods (Dusseldorf: 719064.DU - news) shares fell after the company said that sales growth at Primark, its discount fashion chain, fell slightly in recent months.

It said like for like sales growth for the first half of its financial year was expected to be up by 2pc, compared with forecasts of 3pc and a 3pc performance last year.

The shares slipped 21.13p to £11.97.

However, finance director John Bason said that the market should not over-react because it was down to “the tyranny of rounding”.

The 3pc figure of last year had been rounded up and the 2pc figure had been rounded down. “There was really only about 0.2 or 0.3 percentage points between the two.”

He said sales over Christmas had been “cracking” thanks to the company keeping its prices low and its fashions, with sales of crochet jumpers, lace shift dresses and a jersey “skater” doing well.

The decision not to pass on higher cotton prices to shoppers meant that profit margins at Primark will be lower in the first half.

However, from Easter the lower wholesale cotton price will start to beneft profit margins, Mr Bason said.

But while consumers on a budget helped its Primark division, it dented profits at its Allied Bakeries division, which makes Kingsmill bread.

Mr Bason said that it had been under pressure to cut prices of its loaves on promotion in supermarkets. “A loaf on promotion used to be £1, but it’s now under £1.”

Its (Euronext: ALITS.NX - news) sugar growing business, however, enjoyed a bumper few months as the beet harvest in Britain benefited from a mild autumn, pushing up the sugar content, and the lack of snow, which disrupted the harvest last year.

The overall group, which also owns Silver Spoon sugar and Twinings tea, said on Monday its half year results to March 3 will be in line with its expectations.

Martin Deboo, analyst at Investec (Frankfurt: A0J32R - news) , said: “The big picture remains unchanged in our eyes: rampant sugar, resilient Primark and stuttering grocery and ingredients.”