Shares in Associated British Foods (ABF) shot to the top of the FTSE 100 leader board after unveiling Primark sales that defied the soggy retail environment to beat expectations during the vital Christmas period.

The stock raced more than 6% higher in morning trade to £23.09 as the high street's cheap priced fashion chain reported overall sales up 4% in the 16 weeks to 5 January 2019, with a 1% improvement in UK income.

Investors are willing to forgive the fact that like-for-like sales were modestly down, partly because life has been so tough right across the high street, particularly in November.

But the performance has also been bolstered by increased selling space and stronger performances from its burgeoning Europe and US operations.

In September and October, trading at Primark was ahead of expectations but fewer people heading to the shops impacted trading in November, prompting a sharp fall in the share price.

In the US, Primark has been enjoying a strong performance with sales ‘well ahead’, partially driven by very strong trading at the Brooklyn store.


From a group standpoint Primark remains ABF's main growth driver with other parts of the business struggling, particularly Sugar. This is due to ongoing pressure from falling sugar prices and a generally falling sweet tooth across the eurozone.

Group sales rose 2% on the same period last year with Grocery, Agricultural and Ingredients units helping to offset a 12% slide in Sugar unit revenue.

The company says that EU prices are showing 'early signs of recovery' but the immediate future continues to look tough.

UK yields look set to fall below last year while a poor crop in China means that the Sugar arm will turn a loss this year.

There have been calls to break up the firm, comprising as it does many different divisions and mixed trading conditions. With the Sugar division remaining under pressure it seems likely that investor calls to separate the business could intensify.

That said, the founding Weston family retains a controlling 54.5% stake in the business (through its Wittington Investments arm) so they will continue to call the shots.


AJ Bell investment director Russ Mould argues Primark does not really sell essential items so consumer spending is more discretionary, making it vulnerable to any cutbacks in spending.

‘Lacking a material online operation, Primark is also reliant on high street footfall which is in clear decline,’ comments Mould.

Liberum analyst Robert Waldschmidt is confident the retailer remains well positioned to steal market share and drive double digital sales growth in the year to 30 September thanks to its current expansion.

Issue Date: 17 Jan 2019