* AB Foods Q3 revenue up 8 pct
* Primark Q3 sales climb 20 pct
* Group says on track to meet full-year expectations
* Shares up 7 pct
(Writes through, adds shares, quotes)
By Neil Maidment
LONDON, July 11 Associated British Foods
is seeing signs of improving consumer confidence in Britain,
with a strong performance from its Primark discount clothing
chain helping to lift third-quarter sales by 8 percent.
While many British retailers have struggled as consumers
fret over job security and squeezed incomes, Primark's low
prices are pulling in cost-conscious customers who are at last
beginning to loosen their purse strings.
Primark's performance supports recent British retail data
showing a steady rise in sales, while a separate study suggested
that consumer morale reached a two-year high.
"I think the UK is pointing in the right direction," AB
Foods Finance Director John Bason told Reuters on Thursday. "I
think the UK consumer remains careful; but for the right things,
the UK consumer is spending. Our view is that it's not getting
Sales at Primark, which has more than 250 stores in Britain
and Europe and generates about a third of the group's profit,
grew 20 percent in the 16 weeks to June 22 and are up 22 percent
in the year to date. AB Foods shares rose 6 percent on the news.
As expected, Primark's third-quarter sales growth was slower
than in the first half of its financial year, when sales rose 24
percent including new stores and by 7 percent on a like-for-like
basis. It's third quarter was hit by freezing weather in March
and April, which kept shoppers off the streets.
AB Foods, which will step up Primark's store openings in the
new financial year, including its first in France, said that
underlying sales had been "subdued" by cold weather in the
period but had recovered "markedly" since then.
Third-quarter revenue at the group's grocery division, which
includes the Twinings, Ryvita and Ovaltine brands, rose 7
percent. However, its sugar business saw revenues fall by 15
percent because of delivery timings in the UK and shipments of
Zambian exports to the EU coming after the end of the quarter.
AB Foods said that it remains on track for adjusted
full-year earnings per share (EPS) in line with expectations.
A note from Panmure Gordon analysts said: "AB Foods is, in
our view, on course to deliver another year of double-digit EPS
growth in 2013. Primark's growth remains particularly impressive
... we believe Primark is set for another decade of strong
The broker moved its rating to "buy" and raised its price
target from 18 pounds to 21 pounds.
Primark's fortunes contrast with fellow FTSE 100 retailer
Marks & Spencer, which on Tuesday posted an eighth
consecutive quarterly fall in clothing sales.
Primark added that its first foray online in a trial
launched last month with online fashion merchant ASOS
had drawn an "excellent" response, though it reiterated that the
initiative remains a trial.
The business came under scrutiny in April after 1,129 people
died in the collapse of a factory in Bangladesh, where clothes
were made for various international brands including Primark.
The collapse of the Rana Plaza building ranks among the
world's worst industrial accidents and highlighted the risks
involved with the global retail industry's search for cheap
In May a new accord was launched by trade unions and signed
by 70 brands, including Primark, which have agreed to accept
legal responsibility for safety at their Bangladesh factories.
Shares in AB Foods, which have risen 41 percent in a year,
were up 7.4 percent at 19.49 pounds by 0825 GMT. Analysts expect
the company to post annual earnings per share of 96.41 pence,
according to Reuters data, up 10.6 percent on 2012.
(Editing by Elaine Hardcastle and David Goodman)