Analysts have suggested that growth at Associated British Foods’ grocery unit may be slowing after the UK firm’s trading update today (22 February).
In a trading update released ahead of the company’s first-half results, ABF said it expected to post improved revenues, profits and earnings in the six months to 27 February. The company said it anticipated a “strong increase” in revenue and operating profit “well ahead” of last year.
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“It continues to appear that ABF will report a strong performance in H1 particularly on the top-line, but also on operating profit and earnings growth as well,” analysts at Stanford C. Bernstein confirmed.
However, the analysts cautioned that gains would likely be driven by the performance of ABF’s Primark retail business and improvements at its sugar unit, with a “slowing” at the company’s grocery division.
Revenue at the group’s grocery business, which represents 32% of ABF’s total sales, is expected to slow in the second quarter, Bernstein suggested.
“With top-line growth slowing to 4% in Q1, we expect a weaker semester in H1 from grocery. However, on the positive side, management indicated that operating profits in H1 will be well ahead of last year. For H1, we are currently expecting +3% top-line growth and +35bps of margin growth,” the analysts wrote.
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By GlobalDataLooking at the whole of ABF’s business, Bernstein predicted first-half reported sales growth of +14%, as well as an improved margin performance.
