Proactive Investors - Primark owner, Associated British Foods PLC (LON:ABF) shares jumped 6% after it raised guidance for profit for the second time in four months boosted by a strong performance in its food division.
Analysts at Barclays (LON:BARC) said although Primark's Ebit margin will be lower than expected at 8% in the 2023 financial year due to German restructuring costs, the 2024 margin outlook is more positive on lower (fabric) costs and FX.
"Coupled with a strong showing in grocery and sizeable sugar upgrades for 2024, we upgrade our 2024 Ebit estimates by 7% and raise our target price to to 2400p," the broker said.
Earilier, the FTSE 100-listed firm said it now expects full-year operating profit to be “moderately ahead” of last year.
“For the group overall, outlook for this financial year is slightly better than previous expectations of group adjusted operating profit to be moderately ahead of last year,” AB Foods said in a statement.
In its food business, the company said it continued "to see strong sales growth, particularly in grocery and ingredients and a slightly better than expected performance in sugar."
As a result, adjusted operating profit in its food arm is now expected to be strongly ahead of the previous financial year.
The picture at Primark was mixed.
Full-year sales are expected to be around £9.0bn, 15% ahead of last year, with like-for-like sales growth of 9%, with strong fourth quarter growth, against expectations of 15% and 8% respectively.
Sales growth has been driven by selective price increases, well-received ranges and strongly performing new stores, AB Foods said.
But the second half adjusted operating profit margin is expected to be slightly below 8% and for the full financial year to be around 8%.
Looking ahead, the FTSE 100-listed firm expects its sugar business to make a substantial improvement in profitability in the next financial year.
The firm also expects Primark's adjusted operating profit margin to recover strongly in the next financial year.