The owner of the Primark discount clothing chain, Associated British Foods (ABF), fell 1.7% to £20.95 despite providing the market with some reassurance on the impact of the Omicron variant on the business and maintaining full year guidance.

Primark is entirely reliant on high street footfall as it sells all of its products in stores rather than online. Yet in the run up to Christmas restrictions were imposed across Europe and in England there was a lockdown effect of sorts.

Either because people were isolating after being infected with the virus or because they wanted to avoid catching it and having their festive period disrupted.

However, for the 16 weeks ended 8 January 2022, ABF’s revenue rose 16% year-on-year. Its grocery, sugar, agriculture and ingredients revenues in aggregate were 6% ahead of last year at constant currency.

Total Primark sales in the period were 36% ahead of year earlier when it endured enforced store closures, but still 5% lower than pre-Covid levels in the same period two years ago. Like-for-like sales were 11% below.

SIGNIFICANT IMPROVEMENT EXPECTED

Looking ahead, the company said it expects ‘Primark sales from now to April to be significantly better than sales in the comparable period in the last financial year, when the estate was largely closed’.

Shore Capital analyst Clive Black commented: ‘Overall, our central emotion on this trading update is one of relief that Primark in particular has traversed Omicron in Continental Europe relatively well. More broadly, ABF is facing a veritable tsunami of in-bound inflation plus tough sales comparatives for Grocery in particular; hence, we are pleased to see management’s current September 2022 financial year expectations remaining unchanged.’

Black added: ‘Looking ahead, we continue to see a business with a strong collective of trading entities that are likely to remain intact, that is no Primark spin-off, held within a group with a strong culture and good values.’

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Issue Date: 20 Jan 2022