AB Foods reported a 5.4% revenue increase for the first quarter of fiscal 2024 to 6.885 billion pounds ($8.75 billion) and backed the margin guidance for its retail arm Primark. The British conglomerate said that it expects Primark's adjusted operating profit margin to be above 10%, driving meaningful progress in both profitability and cash generation. Despite not seeing significant impact from the disruption in the Red Sea, the group added that Primark's margin would protect the business from potential additional costs, should they arise. Below is a selection of analysts' comments.
AB Foods' Primark to Benefit From Further Healthy Sales in Short-Term
0801 GMT - AB Foods' performance update reflected a reassuring performance from retail arm Primark, with sales in line with expectations despite a slow start to the period given the warmer weather, RBC Capital Markets' Richard Chamberlain and Manjari Dhar say in a note. The British conglomerate's sales rose 5%, slightly below the high end of RBC's forecast range, while Primark's 8% increase came in line with estimates, they say. "We expect a further healthy sales trend in the short term, given ongoing recovery trends for store-based retailing, with a strong margin improvement for Primark in FY 2024/2025," they say.(michael.susin@wsj.com)
Primark's Backed Margin Guidance Seen Reassuring AB Food Investors
0835 GMT - AB Foods' backed guidance is reassuring in the light of the incremental price headwinds since it was first given in November, Jefferies analysts say in a note. The British conglomerate's retail arm, Primark, reported a deceleration in first quarter of FY 2024 like-for-like sales to 2.1% from 7.5% in the fourth quarter of FY 2023, suggesting that its sales densities gap to peers widened at the end of 2023, they say. However, the reiterated guidance appears to be based on greater deflation support--which the group expects to translate into operating margins--and it sees Primark's margin for FY 2024 above 10% versus a market consensus of 10.3%, the analysts add. Shares are up 1.1%, and up 23% on a 12-months basis. (michael.susin@wsj.com)
AB Foods' Primark's Margin Rebuild Prompts Estimate Upgrade
0848 GMT - AB Foods' first-quarter comments on Primark's guidance prompts an upgrade to Barclays's estimates given the further confidence and certainty regarding costs outlook, the U.K. bank's analysts say in a note. Barclays raises its Primark FY 2024 margin estimate by 30 basis points to 10.6%, and FY 2025 margin to 11.2%. This compares with AB Foods' guidance of above 10%. Management see Primark returning to prepandemic margin ranges and are determined to prove that 10% is a floor and not a ceiling to their margin ambitions, the analysts add. "The Red Sea situation seems manageable but Primark volume remains the key delta as to where margins ultimately land," they add. Shares are up 0.2%, and up 22% on a 12-months basis. (michael.susin@wsj.com)
AB Foods' 1Q Slowdown Should Be Watched Closely
0912 GMT - AB Foods' 1Q update shows a fairly weak set of numbers due to a tough discretionary spending backdrop and the British weather, Quilter Cheviot head of equity research Chris Beckett says in a note. The British conglomerate's retailer arm Primark is experiencing a slowdown in both sales and volumes growth. "With a backdrop of weak retail sales across the market, aside from food, the results aren't too bad but they are worse than the market expected and thus this needs to be watched closely to see if there is any rebound," Beckett writes. Added to that, the economic backdrop remains uncertain, particularly given the disruption in the Red Sea, with AB Foods expecting any price impact to be absorbed by Primark margins, he notes. Shares are up 0.3%. (michael.susin@wsj.com)
(END) Dow Jones Newswires
January 23, 2024 04:34 ET (09:34 GMT)
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