Food processing giant and Primark owner Associated British Foods has posted a bullish trading update, unveiling an upturn in revenues fuelled by Christmas trading.
It reported a 20 per cent year-on-year boost in turnover for the 16 weeks up to January 7 – with revenues climbing to just under £6.7bn.
In particular, Associated British Foods revealed Primark trading has been positive across all markets and ahead of expectations.
The FTSE 100 company said: “We had a very strong Christmas period. We believe our proposition of great quality at affordable prices and attractive store experience is proving increasingly appealing to both existing and new customers.”
It described early trading in the new calendar year as “encouraging” but warned macro-economic headwinds remained such as inflation and the looming threat of a recession, which may weigh on consumer spending in the months ahead.”
The company has enjoyed an accelerated programme of store openings, and remains on track to add a net 1m square feet of retail selling space in this financial year.
Primark is also continuing to make inroads online, with its website supporting a new click-and-collect service.
This is currently available in the UK and Republic of Ireland and will be rolled-out to Germany, Spain and the US over the next few months and an array of other markets by the middle of 2023.
Joshua Warner, market analyst at City Index, argued that the company is remaining cautious over Primark’s strong performance, concerned over future dips in consumer spending over the coming months – despite sustained momentum in trading.
He said: “Primark has performed ahead of expectations and had a strong Christmas period. Evidence suggests more shoppers returned to the high street over the holiday shopping season considering online shopping sites were plagued by disruption to deliveries. In fact, Primark delivered record sales in the week leading up to Christmas Day.”
For the full year, Associated British Foods is leaving its results forecasts as unchanged – anticipating both a significant growth in sales, but adjusted operating profit and adjusted earnings per share to be lower than the previous financial year.
The company’s has generated £3.15bn in revenues across its retail division for the year to date, an 18 per cent uptick in performance.
Across its food division – which includes agriculture, groceries, ingredients and sugar – it has taken in £3.55bn, a 17 per cent boost year-on-year.
Its food businesses has proven resistant to inflationary headwinds, the company passing on higher costs at the shelves, reducing any margin pressure with higher sales.
The company said: “Input cost inflation is becoming less volatile and recently some commodity costs have declined. However, all our businesses continue to work hard to restore margins which have been and remain under pressure.”
Warner described the food businesses as “resilient”
He said: “Cost inflation is easing, and we appear to be past the peak.”
Shares in the company were up 1.4 per cent in early morning trading, following the update.
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