Associated British Foods PLC on Tuesday backed annual guidance as it reported sales growth across the board in the early weeks of its current financial year.

The FTSE 100 listing was down 0.2% at 1,864.50 pence at the open in London.

AB Foods said its Primark high-street retail chain enjoyed a ‘very strong Christmas period’, bucking a consumer confidence malaise in the UK and beyond. However, it said things could sour as tough economic conditions may ‘weigh on consumer spending in the months ahead’.

In the 16 weeks to January 7, group revenue surged 20% to £6.70 billion, from £5.57 billion, as a strong dollar boosted dollar-denominated sales in pound terms. At constant currency, growth was slightly weaker at 16%.

By unit, Grocery revenue climbed 14% and Agriculture revenue by 19%. In Sugar and Ingredients, it rose 31% and 36%, respectively. Across the whole of its Food sub-group, revenue was up 23% to £3.55 billion.

Brands in its Food division include Allinson’s flour, the Blue Dragon range of Asian food products and Kingsmill bread.

‘Pricing actions taken by our Food businesses to recover the significant inflation in input costs are more evident this period. For the full year we continue to expect the aggregate profit of our Food businesses to be ahead of our last financial year but with a lower margin. We now expect the operating result at AB Sugar to be broadly in line with last year as a result of a much-reduced UK sugar crop, and for trading at Ingredients to be better,’ AB Foods said.

AB Foods said input cost inflation in its Food businesses have been ‘less volatile’ recently.

In the Retail division, revenue was 18% higher at £3.15 billion from £2.67 billion a year earlier. Sales in the week leading up to Christmas Day ‘reached a new record’, AB Foods said.

‘To date, Primark trading has been good in all our markets and was ahead of expectation. We had a very strong Christmas period. We believe our proposition of great quality at affordable prices and attractive store experience is proving increasingly appealing to both existing and new customers. Early trading in this new calendar year has been encouraging but macro-economic headwinds remain and may weigh on consumer spending in the months ahead,’ the company added.

‘We had an accelerated programme of store openings in the period and remain on track to add a net one million square feet of retail selling space in this financial year.’

Primark’s like-for-like sales were 11% higher year-on-year.

Sales in the UK alone were up 15%. London-based AB Foods noted most of its UK improvement stemmed from ‘like-for-like growth’.

‘Primark’s share of the total UK clothing, footwear and accessories market by value, which includes online sales, for the 12 weeks ended 11 December 2022 reached 7.0%, up from 6.5% in the comparable period last year, and was very close to the record trading when stores reopened in June 2021 after a prolonged lockdown. Of note, footfall is now strong in major city centres as well as on high streets and retail parks,’ AB Foods added.

Its adjusted operating profit margin at Primark was better than expected amid improved sales. Its margin was still weaker on-year, however, due to inflation.

Primark only operates high-street stores, though AB Foods has recently working on an online offering.

AB Foods added: ‘Primark’s digital capability continues to develop. With improved functionality and better customer experience, the new UK website’s traffic has increased some 85% since last year, with double the average pages viewed per session. The new site has just been launched in the Republic of Ireland, to be followed in the coming months by Germany, Spain, and the US, with remaining markets expected by the middle of the calendar year. We are encouraged by our click and collect trial of children’s products in 25 stores in the UK.’

At group level, AB Foods left guidance unchanged. It expects ‘significant’ annual sales growth but anticipates weaker adjusted operating profit and adjusted earnings per share outcomes. AB Foods ends its financial year in mid-September.

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