Associated British Foods - A mixed bag

The bargain fashion chain helped to increase revenue for its owner Associated British Foods by 4 per cent

The bargain fashion chain helped to increase revenue for its owner Associated British Foods by 4 per cent Toby Melville  Reuters

Shares in Primark owner Associated British Foods have fallen despite the cut-price fashion chain reporting a "record" week of sales in the run-up to Christmas.

In terms of outlook, AB said: "Our outlook for the group is unchanged, with progress expected in adjusted operating profit and adjusted earnings for the full year".

Group revenue for the 16 weeks period rose 4% at constant currency rates and by 3% at actual rates.

Sales in the group's grocery division were 4 per cent ahead at constant currency and 1 per cent ahead of past year at actual rates. Primark further said that the company achieved record sales in the week before Christmas, and trading in the United States has continued to make progress.

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Since the company's financial year end, it retail selling space has increased by 300,000 sq. ft. and at 6 January, the company had 350 stores trading from 14.2 million sq ft, which compared to 13.1 million sq ft a year ago.

In the first half, the company expects operating margins to be close to those in the same period past year with better buying virtually offsetting the adverse effect of the weaker sterling/US dollar exchange rate on purchases.

Sugar revenues and profits are now expected to reduce more than previously forecast as the United Kingdom and Spanish businesses are hit by the end of the European Union sugar regime on 30 September, resulting in the end of sales quotas and the removal of constraints on exports.

Margins in the grocery division are also expected to pick up for the full year. Allied Bakeries losses should be reduced for the year, helped by volumes remaining strong, while the Acetum balsamic vinegar business acquired last year delivered sales in line with expectations. Sales in the United Kingdom and U.S. are progressing well. This was followed by good trading in the five weeks leading up to Christmas. The company expects to open 1.2 million sq. this financial year. And after a bumper Christmas, proving Primark can maintain sales to offset weakness elsewhere will be a key challenge when it publishes Q2 results in late February.

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