Primark-owner Associated British Foods PLC (LSE:ABF) on Monday said full-year expectations have improved, with adjusted operating profit and earnings per share now expected to be broadly in line with the previous financial year. It had previously forecast profits would fall.
Inflation has become less volatile and some commodity costs have declined, the FTSE 100-listed firm said.
But the company cautioned macro-economic headwinds for the consumer remain and may weigh on spending in the months ahead.
“At Primark, we remain cautious about the resilience of consumer discretionary spending in the face of continuing inflation in the cost of living and higher interest rates,” the group said in a statement.
Nonetheless, AB Foods expects Primark operating profits to be ahead of previous guidance in the second half as a result of higher sales and lower operating costs. “For the full year we now expect adjusted operating profit margin to be above 8%,” the firm said.
Full-year adjusted operating profit in its Food businesses are expected to be modestly ahead of last year with Ingredients profit for the full year forecast “to be well ahead of last year“.
But a much lower UK beet crop will reduce second-half profit and bring adjusted operating profit for the full year at AB Sugar broadly in line with the prior year. Grocery adjusted operating profit is seen broadly in line with the prior year benefiting from “pricing actions”.
The improved outlook came as the company updated on first-half performance. The group forecast interim sales to be 20% higher year-on-year at actual exchange rates, with adjusted operating profit expected to be broadly in line with the last year.
Cost pressures remained significant but consumer spending proved more resilient than anticipated.
Primark sales are expected to be up 19% at £4.2bn and adjusted operating profit margin for the half year is now expected to be above 8%.
Profits at the Food businesses are forecast to be significantly ahead of the same period last year but in Grocery profits are likely to fall with inflation in input costs continuing to run ahead of pricing and cost mitigation activity.