Shares of Primark owner Associated British Foods PLC (GB:ABF) fell by over 5% as of writing after the company’s summer sales dropped in the second half of FY24 (ended September 14, 2024). AB Foods expects the like-for-like sales for Primark to drop by about 0.5% in the second half of the year, with a projected decline of about 0.9% in Q4.
Associated British Foods is a diversified company with its business spread across multiple categories. The company generates most of its earnings from its retail brand, Primark.
ABF Suffers Due to Gloomy Summer Weather
Associated British Foods attributed its weak performance to unfavourable weather conditions, which impacted the sales of seasonal products. The adverse weather in the UK and Ireland hit store traffic and dampened sales of Primark’s seasonal womenswear and footwear lines.
Overall, Primark’s revenue growth is projected to be around 4% in the second half of the year. This estimate reflects strong sales from its ongoing store expansion program and growth in other markets. Additionally, AB Foods confirmed that Primark’s underlying earnings are expected to stay on track this year, despite the sales decline in the UK and Ireland.
AB Foods Issues Mixed Outlook
Moving ahead, AB Foods expects solid sales growth for Primark in 2024-25, supported by store rollout and advancements in product, digital, and brand initiatives.
On the flip side, AB Foods cautioned about next year’s profit for its sugar division, which is under pressure due to a steep decline in sugar prices across Europe. The company expects the sugar division to achieve an adjusted operating profit of around £200 million in FY24, falling short of previous expectations. For Fiscal 2025, this profit is expected to decline further to the range of £50 million to £75 million.
Is ABF a Good Stock to Buy?
As per the consensus among analysts on TipRanks, ABF stock has been assigned a Moderate Buy rating. The company’s ratings consist of three Buys, one Hold, and one Sell recommendation.
The ABF share price target is 2,791.25p, which indicates 18.4% upside potential from the current share price.
