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* AB Foods Q3 revenue up 8 pct
* Primark Q3 sales climb 20 pct
* Group says on track to meet full-year expectations
* Shares up 7 pct (Writes through, adds shares, quotes)
By Neil Maidment
LONDON, July 11 (Reuters) - Associated British Foods is seeing signs of improving consumer confidence in Britain,with a strong performance from its Primark discount clothingchain helping to lift third-quarter sales by 8 percent.
While many British retailers have struggled as consumersfret over job security and squeezed incomes, Primark's lowprices are pulling in cost-conscious customers who are at lastbeginning to loosen their purse strings.
Primark's performance supports recent British retail datashowing a steady rise in sales, while a separate study suggestedthat consumer morale reached a two-year high.
"I think the UK is pointing in the right direction," ABFoods Finance Director John Bason told Reuters on Thursday. "Ithink the UK consumer remains careful; but for the right things,the UK consumer is spending. Our view is that it's not gettingworse."
Sales at Primark, which has more than 250 stores in Britainand Europe and generates about a third of the group's profit,grew 20 percent in the 16 weeks to June 22 and are up 22 percentin the year to date. AB Foods shares rose 6 percent on the news.
As expected, Primark's third-quarter sales growth was slowerthan in the first half of its financial year, when sales rose 24percent including new stores and by 7 percent on a like-for-likebasis. It's third quarter was hit by freezing weather in Marchand April, which kept shoppers off the streets.
AB Foods, which will step up Primark's store openings in thenew financial year, including its first in France, said thatunderlying sales had been "subdued" by cold weather in theperiod but had recovered "markedly" since then.
RATING UPGRADE
Third-quarter revenue at the group's grocery division, whichincludes the Twinings, Ryvita and Ovaltine brands, rose 7percent. However, its sugar business saw revenues fall by 15percent because of delivery timings in the UK and shipments ofZambian exports to the EU coming after the end of the quarter.
AB Foods said that it remains on track for adjustedfull-year earnings per share (EPS) in line with expectations.
A note from Panmure Gordon analysts said: "AB Foods is, inour view, on course to deliver another year of double-digit EPSgrowth in 2013. Primark's growth remains particularly impressive... we believe Primark is set for another decade of stronggrowth."
The broker moved its rating to "buy" and raised its pricetarget from 18 pounds to 21 pounds.
Primark's fortunes contrast with fellow FTSE 100 retailerMarks & Spencer, which on Tuesday posted an eighthconsecutive quarterly fall in clothing sales.
Primark added that its first foray online in a triallaunched last month with online fashion merchant ASOS had drawn an "excellent" response, though it reiterated that theinitiative remains a trial.
The business came under scrutiny in April after 1,129 peopledied in the collapse of a factory in Bangladesh, where clotheswere made for various international brands including Primark.
The collapse of the Rana Plaza building ranks among theworld's worst industrial accidents and highlighted the risksinvolved with the global retail industry's search for cheapproduction.
In May a new accord was launched by trade unions and signedby 70 brands, including Primark, which have agreed to acceptlegal responsibility for safety at their Bangladesh factories.
Shares in AB Foods, which have risen 41 percent in a year,were up 7.4 percent at 19.49 pounds by 0825 GMT. Analysts expectthe company to post annual earnings per share of 96.41 pence,according to Reuters data, up 10.6 percent on 2012. (Editing by Elaine Hardcastle and David Goodman)
