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* Primark owner AB Foods maintains earnings guidance
* Group revenue up 4% in the 16 weeks to Jan. 4
* Primark's sales up 4.5%, UK up 4%
* Shares up 2.7%
(Adds detail, FD, analyst, comment, shares)
By James Davey
LONDON, Jan 16 (Reuters) - British retailers are being too
gloomy about the consumer outlook because the fundamentals of
the UK economy are still sound, the finance chief of Primark
owner Associated British Foods said on Thursday.
John Bason pointed out that UK employment is at historically
high levels, while disposable income is still rising.
“Was there a degree of caution by the UK consumer (in the
run-up to Christmas)? Possibly yes. But I find the comments
about gloomy forecasts for the UK consumer surprising, I really
do,” he told Reuters, after AB Foods reported solid festive
trading for Primark, sending the group's shares higher.
“I think people are still spending but being just a little
bit cautious about it,” Bason said.
Major UK store groups, including Sainsbury's and
Marks & Spencer, have said they are not expecting a
bounce in consumer spending in 2020 after a subdued Christmas,
partly blaming continuing Brexit uncertainty.
However, Bason said retailers with real relevance to the
shopper can still prosper.
"I think that the Primark price point is such that we will
continue to draw customers in," he said.
Primark, which trades from 376 stores but does not have an
online offer, generates about half of AB Foods' revenue and
profit.
The group, which also owns major sugar, grocery, agriculture
and ingredients arms, kept its forecast for growth in earnings
in its 2019-20 fiscal year as it reported revenue rose 4%
year-on-year on a constant currency basis in the 16 weeks to
Jan. 4.
Primark sales rose 4.5% on the same basis, driven by new
store openings. Analysts said like-for-like sales growth was
flat.
In the UK, Primark's sales rose 4.0%, with a marginal
decline in like-for-like sales but a gain in market share.
Primark also achieved like-for-like growth in the euro zone
and in the United States, where it is looking to open more
stores.
Shares in AB Foods, the majority of which are owned by the
family of CEO George Weston, were up 2.7% at 1023 GMT, extending
gains over the last year to 21% and valuing the group at about
21 billion pounds ($27 billion).
Bason said climate change and sustainability would become
more important for the fashion industry in 2020.
"We're hearing it from our consumers," he said, pointing out
that Primark was intensifying programmes to increase levels of
organic and sustainable product in its stores.
The firm is increasing five-fold its sustainable cotton
programme so that by 2022 it will have trained 160,000 farmers
in India, Parkistan and China in more sustainable farming
practices.
($1 = 0.7659 pounds)
(Reporting by James Davey; editing by Sarah Young and Mark
Potter)
