AB Food shares jump on strong trading

Associated British Foods posted a healthy trading statement ahead of its full-year results in November. The food producer and owner of Primark said that sales in its retail division were forecast to be around £9 billion – 15% more than last year, with like-for-like sales up 9%. Meanwhile, it enjoyed good sales in the fourth quarter, with sales growth of around 15% and like-for-like growth of 8%. AB Foods says this was down to selective price hikes and well-performing new flagship outlets, as well as its ranges being well-received by customers.

AB Foods: Healthy outlook

The company, which also produces sugar and other foodstuffs, said that it had seen strong sales growth in its grocery and ingredients business, and a better than expected performance in its sugar division. It said that the outlook for the financial year was now “slightly better than previous expectations” and that, as such, adjusted operating profits would be “moderately ahead of last year”. Meanwhile, its new click and collect service is to be extended to its womenswear range, while the new website has also been rolled out. Around £442 million of its £500 million share buyback scheme had also been completed this week.

In terms of outlook, profits at British Sugar are forecast to be substantially better next year thanks to a bumper sugar beet crop this year and a reduction in losses at bioethanol producer Vivergo. Costs, such as freight charges, are also falling, with the US dollar also weaker against the pound, boosting gross margins.

Primark hit by petty thefts

On the downside, the retailer has seen thefts and anti-social behaviour at its Primark stores rise during the cost of living crisis, which hit operating margins. "Higher-than-expected stock loss," as the company terms it, means that second half adjusted operating profit margin will be slightly below 8% and around 8% for the full financial year.

Chief executive George Weston told the Financial Times that Primark has seen thefts across the board – particularly in the UK and Europe. Other retailers, such as JD Sports, have also been hit by robberies orchestrated via social media, while Tesco has also reported increased thefts.

Analysts at broker Royal Bank of Canada think the shares could reach 2,250p, although those at JP Morgan Chase recently cut their price target on them to 1,875p.

The shares are up 50% this year to 2,108p and are worth holding, given the improved outlook and AB Foods’ strength in the cost of living crisis, but investors may wish to take some profits. The company announces its full-year results on 7 November.

Past performance is not a guide to future performance