Jul 8, 2010
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AB Foods Q3 sales rise led by upbeat Primark

Jul 8, 2010

(Reuters) - Primark owner Associated British Foods gave an upbeat update Thursday saying its third quarter sales jumped 13 percent and expected very strong growth in annual earnings, driven by its fashion discount retailer.


Its 198-strong Primark chain reported sales in its spring quarter rose 15 percent outperforming many of its rivals and helped by a strong line of floral print dresses, court shoes and accessories in its key markets of Britain, Ireland and Spain.

The London-based food and retail group did not give a like-for-like figure for its 16 weeks to June 19, but house broker Panmure Gordon calculated Primark growth at 7 percent, just off from its first half 8 percent like-for-like growth.

The stores have coped with the downturn better than most as its cheap chic clothes have proved a hit with cash-strapped shoppers, but group finance director John Bason added a note of caution due to general economic conditions in Western Europe.

"Wider consumer sentiment might start to weigh into next year," Bason told Reuters referring to the group's next financial year starting in mid-September.

Overall nine month sales at its Primark stores were up 17 percent, while the strong sales prompted it to look for a rise in annual operating margins rather than previous flat forecasts.

"Another upbeat trading statement from ABF, with Primark in particular impressing," said Panmure analyst Graham Jones which prompted him to push up his earnings forecast for the year to September 2010 to 68 pence a share from 67.5p previously, to show an 18 percent rise.

AB Foods shares were up 1.4 percent at 9.94 pounds by 9:01 a.m. British time outperforming a firmer London market. They have outpaced the FTSE 100 by nearly 30 percent this year as they have rebounded from a low of 603 pence in March 2009.

Primark's performance came after Britain's biggest clothing retailer Marks & Spencer posted a third consecutive rise in underlying April-June quarterly sales of 3.6 percent on Wednesday but also sounded a cautious note.

AB Foods, 55 percent owned by the family of Chief Executive George Weston, said its group revenue for the year so far, or the 40 weeks to June 19, rose 14 percent, and added, "Trading for the group since the half year remains on track to deliver very good progress in earnings for the full year."

The company, which markets Silver Spoon sugar, Mazola vegetable oil, Ovaltine drinks and Twining teas, has benefited from a strong recovery at its sugar and grocery businesses after heavy investment and a pick-up in demand.

(Reporting by David Jones; Editing by David Cowell, Mike Nesbit)

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