Penneys owner AB Foods forecasts flat first-half earnings

Associated British Foods expects to deliver first-half revenue growth in all of its businesses, other than sugar, helping it to deliver earnings per share broadly in line with the previous year.

The group, which owns the Primark clothing chain and trades as Penneys in Ireland, as well as major grocery, agriculture and ingredients businesses, said it expected a small reduction in adjusted operating profit for the 24 weeks to March 2nd, offset by lower net financial expenses.

ABF made an adjusted operating profit of £648 million (€745.5 million) in the first half of its 2017-18 financial year, with adjusted EPS of 61.3 pence.

For the full 2018-19 year the group’s outlook was unchanged with adjusted operating profit and adjusted EPS expected to be in line with 2017-18.

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The group said Primark’s first-half sales were expected to be up 4 per cent, with increased selling space partially offset by a 2 per cent decline in like-for-like sales.

With a much higher margin, Primark’s profit was expected to be “well ahead” of the same period last year. Early trading of Primark’s new spring/summer range had been “encouraging”.

The company said the UK continued to perform well and “we substantially increased our share of the total clothing, footwear and accessories market, with sales 2 per cent ahead of last year”.

Strong growth

Sales in the euro zone are expected to be 5 per cent ahead of last year, with particularly strong growth in Spain, France, Italy and Belgium. Like-for-like sales in the euro zone are expected to decline by 3 per cent.

“In Germany we have strengthened management and plan focused marketing to address trading which continues to be difficult,” the company said. “Preparations are underway to reduce selling space at a small number of German stores in order to optimise their cost base.”

In the US, the business continues to “perform strongly”, driven by “excellent trading” at its recently-opened Brooklyn store.

AB Foods cautioned last year that profit in its sugar business would be significantly lower this year reflecting lower EU sugar prices for contracts negotiated at the end of the last financial year. – Reuters