AB Foods - Primark growth accelerating

By David Jones

LONDON (Reuters) - Discount fashion retailer Primark saw its third-quarter growth accelerate, helped by good weather and the attraction of its low prices in a downturn, but its owner Associated British Foods (ABF.L) held to its flat year earnings forecast.

The 190-strong stores division reported its sales rose 21 percent in the 16-week quarter to June 20, and its like-for-like sales growth was above the 5 percent of its first half, with its house broker putting the growth at 7 to 8 percent.

"We are hitting the right spot with the consumer, trading has picked up and the weather has been good. Like-for-like sales have improved from the first half," AB Foods finance director John Bason said on Thursday after a third-quarter update.

The London-based food and retailing company, 55 percent owned by the family of Chief Executive George Weston, said its third-quarter group sales rose 15 percent helped by growth at Primark and also its sugar and grocery operations.

Although the group, which markets Silver Spoon sugar, Twining tea and Ovaltine drinks, stuck to its forecast of flat earnings for the current year to September 2009, Bason was more upbeat for the following financial year.

"Next year there are grounds for optimism, particularly in sugar and also in grocery while Primark's momentum will continue," Bason said.

AB Foods shares rose to an early high of 772 pence but they dipped 0.8 percent to 759p by 8:45 a.m. on some disappointment the group had not improved its outlook forecast.

Analyst Graham Jones of house broker Panmure Gordon said Primark's growth was better for the third quarter than its first-half performance, which he put at 7 to 8 percent, while there was solid progress in sugar and an improved grocery performance.

"The outlook for the full year is unchanged, but we are increasingly confident about our forecast of a return to strong earnings growth next year," he said.

Jones held his earnings forecast at 55 pence a share for the year to September 2009 after last year's reported figure of 54.9p, but raised his 12-month price target for the shares to 810p from 790p.

(Reporting by David Jones; Editing by David Cowell and Hans Peters)