ABF: Primark owner powers through footfall slump to deliver solid growth

Primark owner Associated British Foods (ABF) has reported a “significant improvement in profitability” despite a rainy summer threatening to dampen sales.

The London-listed firm, which also owns Twinings Tea and a raft of food businesses, said it expected to see increased sales across its retail, grocery and ingredients divisions during its second half ending September 14, 2024.

Primark’s UK revenue increased by four per cent during the period, driven by a “strong sales contribution” from its continued store expansion programme. 

This was despite like‐for‐like sales shrinking by around 0.5 per cent during the six months, with growth of 0.2 per cent in the third quarter and a projected decline of around 0.9 per cent in the fourth quarter.

ABF said this was down to a wash out summer season, which resulted in lower footfall and particularly impacted sales of its seasonal lines in womenswear and footwear. 

Primark’s market share decreased slightly to 6.5 per cent during the half, reflecting the lower high street footfall.

ABF said this had been offset by its continued efforts to expand its store portfolio in the UK, opening two new stores, extending two existing stores and re‐locating two stores during the period.

Sales growth is expected to be around five per cent in Europe and 25 per cent in the US after it launched its first marketing campaign in the New York area.

Overall, the company’s outlook for adjusted operating profit for Primark remained unchanged.

ABF grocery success

ABF said its grocery division had “continued to perform well” with sales expected to grow around 3 per cent in its second half, reflecting high demand.

Twinings maintained strong sales momentum in its largest markets including the UK, US and France, which the company said reflected its increased distribution and new product launches.

Malted drink brand Ovaltine delivered continued growth in Europe in its second half and an improved performance in Thailand.

As a result, ABF said it expected its grocery profitability over the six months to be slightly ahead of its previous expectations and now in line with the second half its last financial year.

The group’s yeast and bakery ingredients business, AB Mauri, saw growth across most regions.

Overall, it said its portfolio of ingredients businesses had “an encouraging performance” after a period of customer destocking.

During the period the company completed the acquisition of Omega Yeast Labs LLC, which provides liquid yeast to the craft brewing industry in the US, and Mapo, an Italian manufacturer of frozen baked goods.

Sugar and agriculture woes

Not all of ABF’s divisions had such a successful second half.

Its sugar business, which operates across the UK, Europe and Africa, is expected to deliver adjusted operating profit of approximately £200m – ahead of last year but behind previous expectations due to a reduction in European sugar pricing.

As a result, ABF said both of its European sugar businesses had experienced a negative impact on sales and profitability over the final three months of the period.

Agriculture sales are also expected to decrease slightly in its second half due to continued soft demand in the UK and China.

It said that Frontier, its which focuses on grain trading in the UK, had been impacted by prolonged wet weather.

Overall, profitability for the full year is expected to be broadly in line with last year.