Market Analysis

AB Foods share price hurt by weakened sales from Primark

Retail trading giant Associated British Foods share price tumbled lower on the FTSE100 on Monday after the company said that it expected to a 2 percent decrease in like-for-like sales during the first half Q1, which was worse than most analysts had been expected. The bearish news came as Associated British Foods gave investors an update on their business activity from the twenty-four weeks to March 2nd.

The company said that the disappointing sales forecast was down to poor sales during the Black Friday period, where Primark had to compete with other brands slashing retail prices across the board and also Brexit uncertainty, which is currently hurting consumer sentiment and spending in the United Kingdom. Investors chose to shrug-off expectations that the company will see an expected four percent increase in sales from the same period last year when the companies full results are released on April 24th.

Associated British Foods made an adjusted operating profit of £648m during the first half of 2018, with adjusted earnings per share of some 61.3 pence. For the year 2018 to 2019, AB Foods outlook was unchanged, with the companies adjusted operating profit and adjusted earnings per share largely forecast to be in line with 2017 through to 2018.

Associated British Foods noted that it had seen first-half revenue growth in all of its businesses, other than sugar, helping it to deliver earnings per share that were similar to last year. The company reiterated to investors that profit in its sugar business would be significantly lower this year, which is due to lower European Union sugar prices for contracts negotiated at the end of the last financial year.

Primark, which accounts for about half of AB Foods’ revenue and profit, currently has over three hundred retail outlets in Europe and North America and is considered a bell-weather for the discount retail spending arena.  Associated British Foods share price has lost close to fifteen percent over the past year and underperformed the broader FTSE100 Index, which is down just under one percent for the same period.


ABF.UK Daily Mount Chart | Source: ActivTrader

ABF.UK Daily Mount Chart | Source: ActivTrader 

Looking at the technicals for Associated British Foods share price, the 50-day moving average is currently offering strong technical support, although pressure is currently building to the downside. Buyers have been unable to rally above the shares 200-day moving average, with this in mind, a break below the 50-day exposes further losses towards the current 2019 trading low.


Written by Nathan Batchelor, External Analyst


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