'Sell' AB Foods after first quarter trading update, Canaccord recommends

Canaccord Genuity reiterated a ‘sell’ rating on Associated British Foods on Friday, citing flat first quarter Primark sales.

AB Foods on Thursday said in a trading update on Thursday that its sales rose 7% in the 16 weeks to 2 January at constant currencies but fell 3% at actual exchange rates due to the weakening of the euro against sterling.

While the group did not disclose its sales figures for its low cost fashion retailer Primark, it said it had been strong in the first seven weeks of the quarter but weaker in the following nine weeks on unseasonably warm weather.

Analysts suggested that this meant trading had been flat.

“The first quarter interim statement reveals Primark like-for-like (LFL) sales are running about flat (consensus +2%), hurt by the unseasonably warm weather across most of Europe this winter,” said Canaccord analysts Alicia Forry and Eddy Hargreaves.

“The LFL performance is disappointing, given the easier comparatives in the period compared to the upcoming second half, but strong operational control of the business has limited markdowns thereby delivering better than anticipated margins.”

Canaccord left its target price at 2,600p.

Shares fell 0.23% to 3,011.72p at 1245 GMT.