Associated British Foods

Ticker ABF

Today's data summary

Market open
% change
-0.05%
Price Pence
1855.50
Change
-1.00
As of 09:42 06 Aug 2020
Market cap. Pound sterling
14,689.51 million
As of 09:42 06 Aug 2020

Latest updates

Primark owner warns of hit to sales

Primark store
PA Media

The owner of the Primark fashion chain, Associated British Foods, has warned of the impact the forced closure of its stores in some European countries will have on its sales.

It said that given the actions taken in Italy, France, Spain and Austria, stores accounting for 20% of its selling space are now closed until the respective governments permit them to re-open.

AB Foods said that the stores in these countries account for 30% of Primark's sales, and it had expected sales of £190m from these stores over the next four weeks.

The rest of the chain, including the UK which represents 41% of sales, "has seen like-for-like sales declines over the last two weeks and these have accelerated over the past few days as a result of reduced footfall".

"We are managing the business appropriately but do not expect to significantly mitigate the effect of the contribution lost from these sales."

However, AB Foods added that since it issued a trading statement in February, the situation in China had improved, with most factories supplying Primark having re-opened.

"As a result, supply shortages from that country are now expected to be minimal," it said.

AB Foods added it had "not seen a material impact in our sugar, grocery, ingredients and agriculture businesses".

Primark ' is well-placed to handle disruptions'

Primark shoppers
Getty Images

Responding to Primark's warning over coronavirus fears, Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said there is some good news in the retailer's owner' ABF figures published today.

"The good news is the group has existing suppliers in other regions, which could be called on to plug any holes in the production line," she said.

"It also builds stock in the lead up to Chinese New Year, meaning it has extra inventory to fall back on for now.

"The net effect is Primark is well placed to handle near-term disruptions, but it’s one to keep an eye on."

Shares have fallen 2.25% to 2,525.

FTSE 100 - the biggest winners and losers

At the close of trade the biggest riser on the 100 share index was Ocado, which rose by 4.25%, followed by Kingfisher, up 3.83% and Primark-owner Associated British Foods up 2.18% and Sainsbury's up 1.94%.

The biggest fallers were NMC Health, down 10.59%, Standard Life Aberdeen, 3,35% lower and Rentokil Initial, which was 2.23% down at the close.

FTSE 100 clings onto gains

Andrew Oil platform
BP

The FTSE 100 remains in positive territory - just - as we go into lunchtime. It's at 7,587.74, a rise of 12.4 points or 0.16%.

Primark-owner Associated British Foods is leading the pack - up by 3.1%.

The mid-cap FTSE 250 is also ahead at 21,823.65, that's a rise of 63.12 points or 0.29%.

Premier Oil has extended its gains following its acquisition of some North Sea oil assets, including BP's Andrew platform (see earlier post) and is now up by 16.81%.

Retail shares romp ahead

Shopping basket of Morrisons goods
Morrisons

Let's check in on the best and worst performing shares on the FTSE 100 so far.

Retailers dominate the top risers. Supermarket Morrisons leads the pack, gaining nearly 3%, despite reporting a fall in sales over the Christmas period.

Arlene Ewing, investment manager at Brewin Dolphin, said the drop was "not as bad as some had expected" and initial indicators of its decision to rebrand some McColl's shops as Morrisons convenience stores "look promising, with another 20 or so stores to be trialled at the beginning of 2020".

B&Q-owner Kingfisher has risen by about 2.3%, while Associated British Food, which owns Primark is also up by about 2.3%.

It's a mixed bag among the biggest fallers, with Standard Life Aberdeen shedding 2.77%, Rentokil Initial is down 2.3% and Polymetal International just over 1% lower.

ABF results send shares climbing 6%

Primark shoppers
Getty Images

Primark owner Associated British Foods earlier revealed that adjusted operating profit hit £1.42bn in the year to 14 September, a 1% climb on the previous year.

That's pleased the market which has sent the company's shares up almost 6% today, to lead the FTSE 100 winners.

ABF shares are up 132 at 2,381.

Primark's margins hit by sterling

Primark
Getty Images

Associated British Foods has issued this guidance on its clothing arm Primark.

It says Primark will continue to expand its selling space next year, with the most stores being added in France and Spain. It also says Primark has a strong pipeline of good quality sites.

"We expect cost reductions in both the cost of goods and overheads during the year, but the weakness of sterling during this financial year will result in a margin decline for Primark in the first half.

"The sterling exchange rate is currently very volatile but, at current exchange rates, we now expect margin in the second half to be in line with the same period this year and margin for the full year to be only a small reduction on that achieved this year."