Like most of its peers, 2018 wasn’t the best year for the grocery-retail hybrid. Opening at £28.22, an ok-ish first half gave way to a sour back end, with the stock eventually tumbling to a 5-year plus low of £20.51 by the end of December.
It has rallied a bit since the start of 2019, however it is still well off where it was this time last year, with Associated British Foods (LON:ABF) PLC now at a current trading price of £22.40 (Spreadex, 10/01/2019).
Though early November was when the aggressive sector-wide slump began, one ABF wasn’t immune to, the company’s annual results released at the start of the month were relatively well received. Group revenue nudged 1% higher to £15.6 billion, while adjusted operating profit was up 3% to £1.404 billion.
As ever, Primark was the star. While Sugar revenue plunged 15%, and the Grocery division added just 1%, the high street staple saw sales surge 6% to £7.477 billion. It was the same for adjusted operating profit; Primark’s 15% increase to £843 million helped compensate for the 51% decline in Sugar. Yet it wasn’t all good news at the budget fashion brand, with like-for-likes falling 2.1%.
Considering the important of Primark, December’s AGM statement, one that said during November ‘trading was challenging, in a tough retail market’, put the willies up ABF investors, the stock dropping nearly 4% despite the company claiming it still expects to profits to rise at the retailer.
Primed for the worst by the varying degrees of Christmas disaster incurred by ABF’s rivals, investors will be hoping a decent December helped ease the problems that arose in November. Specifically they’ll be on the lookout for any change for Primark’s profit forecasts for the year ahead, after ABF’s attempts at reassurance last month.
Associated British Foods PLC(LON:ABF) has a consensus rating of ‘Buy’ alongside an average target price of £29.47.
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