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(Sharecast News) - Food and retail company Associated British Foods said on Monday that recent trading had been in line with expectations, with revenues up across all of the group's key verticals due to both price hikes aimed at recovering input cost inflation and a marked volume increase in its ingredients division.
Associated British Foods posted a 32% increase in group revenues to £.3.03bn for the three months ended 28 May, with a 24% improvement in ingredients revenue leading the way.
The FTSE 100-listed firm highlighted that all of its Primark stores traded during the period, compared to the same time in 2021 when most stores were closed until the middle of April and saw an uplift in sales in the quarter.
As a result, Primark quarterly sales grew 81% year-on-year and 69% year-to-date. Sales were also 4% higher than the comparable pre-Covid period three years earlier, while like-for-like sales improved to 9% below pre-Covid levels since the half.
In the UK and Republic of Ireland, like-for-like sales improved "markedly", while in continental Europe performance only started to improve at the end of the quarter following the removal of remaining Covid restrictions. Primark remains on track to deliver a full-year adjusted operating profit margin of some 10%, according to ABF.
"Sales and adjusted operating profit in the period were in line with our expectations. Our full-year outlook remains unchanged with significant progress expected in adjusted operating profit and adjusted earnings per share for the group," said the group.
ABF also revealed it will launch a trial of a UK click-and-collect service on children's products, a move it expects to drive higher footfall and incremental sales in up to 25 stores in the northwest.
Hargreaves Lansdown's Laura Hoy said: "Inflationary concerns were noticeably absent from Primark owner Associated British Foods' third-quarter results. The group's pushing ahead with its digital expansion, trialing a new click-and-collect service in the UK and management sees full-year operating margins recovering to around 10% as expected. This was a departure from the cautious note that CEO George Weston struck at the half-year when he warned about the impact of inflationary headwinds on margins.
"Management said it would be forced to raise prices on its autumn and winter collections back in April. But bikinis and flip-flops are still at the top of the shopping list for holiday-obsessed consumers right now. So the impact of these price hikes on volumes is yet to be determined. The group's in a good position as we head into tougher economic conditions, with its lower-priced items more appealing to cash-strapped consumers, but a slowdown in consumer spending is sure to hit the entirety of the sector."
Reporting by Iain Gilbert at Sharecast.com
