24 January 2023
If you are covering Associated British Food’s latest trading statement, please find below a comment from Chris Beckett, head of equity research at Quilter Cheviot:
“Associated British Food’s latest trading update showed strong sales growth from all divisions but management still expect a profit decline this year as inflation continues to have a significant effect on margins.
“The business continues to take advantage of the retail recovery story following Covid, while inflation has also been positive for ABF’s prices. Primark in particular enjoyed a very strong Christmas period, growing sales across the world and ahead of management expectations. Primark has previously indicated that it has prioritised sales recovery at the expense of short-term profitability, but it will be looking for future innovation to help boost the later. On that note, the click and collect trial on children's clothes in the Northeast is described as 'encouraging'.
“After a very strong run, together with most UK retail names, with the stock up over 50% since beginning of October, it trades at somewhat of a fair valuation now. Given the state of the UK consumer and the retail environment, there are stronger businesses who can probably weather the storm better.”
