Primark continues to carry the majority of interest in the Associated British Foods’ stock, said Shore Capital, which held its buy rating.
Sales in ABF’s apparel arm grew 16% year-on-year thanks to higher volumes while performing against Omicron comparatives.
Analysts at Shore Capital said it was “marvellous” to see management state that trading was “good in all its markets, well ahead of expectations.”
ABF also touched on inflation in its trading update, namely, it has become less volatile while some commodity costs have also declined.
Shore Capital expects margin recovery however in its grocery division to fall year-on-year in the first half, although this would be offset by improvements in the second half as well as profitability in its ingredients arm.
Cash is expected to be down by £900mln in the full year to £600mln, which Shore Capital said reflects stock build-up at Primark and elevated and ongoing capital expenditure, as well as the ongoing buyback, of which £140mln worth of shares have been repurchased.
The broker provisionally raised the FTSE 100 company’s earnings per share estimates by roughly 11%.
A target price of 1974p was set by the broker.