AB Foods Says Primark Sales Boost Helped Offset Sugar Drop

Associated British Foods Plc said “excellent Christmas trading” at its Primark discount clothing unit helped offset a drop in sugar sales in the fiscal first quarter.

Revenue at constant rates, which excludes shifts in currency, rose 1 percent in the 16 weeks to Jan. 4, the London-based company said in a statement today. Sales at Primark rose 12 percent in the period, helping to mitigate a 27 percent decline in sugar sales.

“Building upon the like-for-like growth already achieved, and with the further store expansion planned for the remainder of the year, Primark’s profit will be well ahead of last year with a higher margin than expected,” AB Foods said.

The company reiterated a Nov 5. warning that declining sugar profits meant full-year earnings per share will fail to grow, yet there is no reason to further downgrade the forecast, Chief Financial Officer John Bason said in an interview. Primark didn’t offer discounts ahead of Christmas -- in contrast to many of its U.K. high street competitors -- strengthening the retailer’s profit margin, Bason said.

Global sugar prices are now “unsustainably low” and will hurt sales in that unit more than previously expected, he said.

AB Foods shares declined as much as 4.8 percent, the most on an intraday basis since May 16, and traded 4.4 percent lower at 25.77 pounds as of 10:30 a.m. in London. The shares surged 56 percent last year after Primark overtook sugar as the biggest contributor to earnings. European retail shares broadly fell after Royal Ahold NV and France’s Carrefour SA both reported disappointing updates.

Primark probably increased same-store sales by 4 percent in the first quarter, accelerating to 8 percent in the the run up to Christmas, Panmure Gordon analyst Graham Jones said in a note to clients today.

The retail chain plans to add 1.1 million square feet of net selling space this year, “substantially more” than in 2013, the company said.

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