Associated British Foods Plc (ABF) said earnings per share in the current fiscal year will fail to grow as declining profit from the sugar business offsets growth at the Primark clothing chain.
Adjusted earnings per share rose 13 percent in the 12 months ended Sept. 14 to 98.9 pence, and AB Foods expects a “similar” result this year, the London-based company said today. Primark’s adjusted operating profit rose 44 percent to 514 million pounds ($825 million), topping the 435 million pounds of earnings from its sugar division. The stock fell as much as 3.6 percent, the steepest intraday drop in two months.
“Management’s tone around 2014 seems cautious,” said Andrew Wood, an analyst at Sanford C. Bernstein, who had forecast 3 percent earnings per share growth. “We would expect to reduce our estimates.”
The sugar industry has been weighed down by price pressure caused by accelerating imports from outside the European Union. Primark’s discount fashions have seen the chain become a favorite with U.K. shoppers wanting the latest designs at cheap prices. The retailer is also expanding across Europe, helping sales gain 22 percent to 4.27 billion pounds.
Shares in AB Foods traded 2.6 percent lower at 2,196 pence as of 10:49 a.m. in London trading. The stock is up 40 percent this year.
“Sugar was in line with our expectations and it was a remarkable year for Primark,” Chief Executive Officer George Weston said in the statement. The company won’t spin off Primark, the CEO said in an interview today.
Primark’s like-for-like sales increased 5 percent for the year, meeting analysts’ estimates. The chain plans to open its first French store in Marseille just before Christmas, followed by stores in Dijon and three just outside Paris next year. The company will expand in existing European markets, Weston said, and it has no plans to offer shopping online.
“There is lots and lots of scope in our existing markets,” the executive said. “We’ve just entered France as our ninth market. There are only 10 stores in Germany, against 161 stores in the U.K.”
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