AB Foods Slips as Primark Budget Clothing Sales Growth Eases

Associated British Foods Plc said sales growth slowed at its Primark discount clothing chain as business conditions returned to normal after an “outstanding” start to the year.

The stock fell as much as 2.6 percent, the biggest intraday drop since Sept. 7. Sales at Primark will rise about 23 percent in the period ending March 2, slowing from 25 percent in the first 16 weeks, London-based AB Foods said today.

The full-year outlook is unchanged even as first-half profit will beat the company’s expectations, AB Foods said. Primark revenue benefitted from a cooler start to autumn, after a warm season a year earlier, and a strong Christmas, Finance Director John Bason said in an interview. Still, the executive said he sees Primark’s 7 percent same-store sales growth “probably easing” for the remainder of the year.

Primark’s slowing sales “will catch the headlines,” said Martin Deboo, an analyst at Investec in London with a hold recommendation on AB Foods. Same- store revenue growth weakened to about 5 percent in the second quarter, he estimated.

The stock fell 0.4 percent to 1,822 pence at 10:12 a.m. in London trading, paring this year’s gain to 17 percent.

Sugar Division

First-half operating profit will be higher than last year, while earnings per share will be “substantially” ahead, the company said. Still, expectations for the year remain unchanged, with growth being weighted “heavily” toward the first half.

Primark’s first-half strength will be partly offset by the sugar division, where profit will probably be lower because of a decline in China and a charge for mothballing two plants in the Asian country, the company said. Sugar profit is also likely to decline for the year, it said, citing reduced production, a higher beet cost and a weaker euro in the first half.

Agriculture profit will show “further progress” in the first half, the company said today, while earnings at the grocery unit will be “substantially improved” as last year’s restructuring costs in George Weston Foods in Australia and Allied Bakeries aren’t repeated.

“I really do” think George Weston has turned a corner, Bason said in a phone interview. “We were able to get bread-price increases to cover the wheat cost,” he said, with mid-single-digit percentage price gains, and 10 percent higher volume in its meat business.

Ingredients sales in the first half will be “in line” with last year as the company introduced new products in bakery, feed and specialty enzymes, AB Foods said.