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Primark Owner AB Foods Raises Financial Outlook Amid Resilient Consumer Spending

AB Foods, the parent company of Penneys and Primark, has revised its full-year 2022-23 financial guidance upwards, attributing it to unexpectedly resilient consumer spending.

Primark’s sales have exceeded expectations, with first-half sales until March 4 expected to reach £4.2bn (€4.76bn), up 16% at constant currency, and the adjusted operating profit margin predicted to be above 8%.

The group cited its attractive store experience, affordable prices, and excellent quality as a strong draw for both new and existing customers. It also stated that early reactions to its spring and summer ranges had been “very positive.” Last September, Primark decided to limit further price increases in 2022-23, aiming to maintain its value credentials.

AB Foods also owns major sugar, grocery, agriculture, and ingredients businesses. It predicts that total first-half sales will be 16% ahead of last year at constant currency, with adjusted operating profit largely in line with the previous year.

Its food businesses, which include grocery brands such as Jordans cereals, Ovaltine drinks, and Twinings tea, continue to attempt to recover inflation through cost mitigation and price increases.

AB Foods now forecasts adjusted operating profit for 2022-23 to be roughly in line with the previous year, compared to the prior expectation of being lower than the £1.44bn earned in 2021-22.

Although the recovery of significant inflation in input costs is a management priority, the company notes that inflation has become less volatile, and commodity costs have recently fallen.

However, the company remains cautious about the resilience of consumer discretionary spending, as macroeconomic headwinds for the consumer persist, and inflation in the cost of living and higher interest rates may weigh on spending in the upcoming months. AB Foods shares have risen 2% in early trading, increasing by 24% so far this year.

In conclusion, AB Foods’ Primark and Penneys’ owner has increased its full-year financial outlook on the back of stronger-than-anticipated consumer spending, citing an attractive in-store experience, affordable prices, and excellent quality. Although inflation remains a concern, the company is hopeful that the trend will stabilise.

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