Food and fashion Associated British Foods said that sales grew in the first quarter thanks to improving sales at its Primark clothing arm.
At £23.03 per share, the ABF share price was 1.5% higher in Tuesday trading.
Group revenues for the 16 weeks to 6 January rose 2.8% year on year, to £6.9 billion. At constant currencies sales advanced by 5.4%.
Growth was driven by strong takings at its Primark value clothing division. Turnover at ABF’s Retail unit advanced 7.3% (or 7.9% at stable exchange rates), to £3.4 billion.
The FTSE 100 company said that Primark witnessed “a slow start given the unseasonal warm weather” but then “strong Christmas trading.” Like-for-like sales increased 2.1% year on year thanks to higher average selling prices.
Sales Steadily Improve
ABF described sales of its womenswear and menswear as “strong” and especially in “performance wear, leisure and tailored clothing and in our Rita Ora collection.” It added that sales of its Christmas products were robust.
In the UK, revenues increased 4.5%, while like-for-like sales were up 3.8%. Thanks to strong sales in the run-up to Christmas, Primark’s market share hit new all-time highs of 7.1% for the 12 weeks to 10 December.
Turnover in its European markets rose 8.1% during the 16 weeks to 6 January. This was up 1.3% on a like-for-like basis.
ABF said that “performance was mixed with some countries trading well and other countries impacted by a combination of strong comparatives in the same period last year and local economic conditions.”
In the US, the opening of new stores helped facilitate a 45% jump in sales over the 16 weeks.
The firm described contributions from its new stores as “very strong.” It opened three shops in the US and another three in France in the first quarter, along with one in Spain and another in Poland.
Mixed Results Elsewhere
Meanwhile, sales at Grocery improved 1.8% in the first quarter to £1.4 billion, or 5.4% on a constant currencies basis.
The FTSE firm said that “our US-focused brands, including our Stratas joint venture in edible oils, continued their strong performances from last year.” It added that its Twinings tea brand “traded well across its key markets,” but that demand for its Ovaltine drink dropped due to trouble in Asia.
Turnover at the Sugar unit rose 3.8% year on year to £825 million, or 13% on an underlying basis. ABF said that sugar production looks set to be “significantly above last year despite the recent weather,” which in turn should bring production back to historical levels.
Sales at Ingredients fell 2.8% year on year to £698 million, although on a like-for-like basis revenues were up 0.9%. Agriculture sales slumped 12.1% (or 10.8% at stable currencies), to £572 million.
Bright Outlook
ABF said that “the group continues to trade well”, adding that “we continue to look forward to a year of meaningful progress in both profitability and cash generation.” This would be helped by a recovery in Primark margin and improving profits at British Sugar, it predicted.
The firm added that “we also feel more confident in the delivery of the Primark adjusted operating margin in this financial year, driven by a further improvement in product gross margin.”
ABF added that this will “insulate us well against potential additional costs of supply due to the disruption in the Red Sea should they arise.”