(Sharecast News) - Analysts at Barclays downgraded Associated British Foods to 'equal weight' on Friday, stating visibility was "just too low".
Barclays said that with the sterling plunging to its weakest level versus the US dollar since 1985, combined with record energy costs, Primark's margins will now come under pressure - with a forecast margin of 7.5%.
In the second half of the year, the new expectation is for a margin of 8% but Barclays said that the main disappointment was news that 2023 margins will be lower than in the second half of 2022.
"Despite Primark taking HSD pricing, it can't justify taking more pricing simply to hit a percentage margin when there is massive near-term volatility on all key cost lines," noted Barclays.
"Neither currency or energy is within Primark's control, but we do think the weakness in Continental European LFLs is a concern."
Barclays stated that European like-for-likes of -18% in the fourth quarter was worse than -15% last time but noted that one positive in ABF's earnings was the fact that UK Primark trading was "very solid", with higher footfall and densities.
Reporting by Iain Gilbert at Sharecast.com
AB Foods (ABF)
