Associated British Foods PLC (LSE:ABF) will on Tuesday release half-year results with its shares up over 25% since the start of the year, continuing the rally since sinking to 10-year lows back in October, pushing towards 15-month highs just above £20 apiece.
But the shares in the Primark owner are still down more than 20% from where they were before the first Covid lockdown in early 2020.
We last heard from the conglomerate in February, when it upped its full-year guidance, saying it no longer expected profits to fall, and predicted earnings per share would be broadly in line with the previous year, helped by inflation becoming less volatile and some commodity costs declining.
“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.
Group sales for the first half were up around 7%, with sales at Primark business expected to be 16% ahead of the same period last year.
Analysts at Citi are less optimistic about Primark's sales growth in the second half of the year but think the company will still perform well.
They are concerned about the impact of inflation on consumer spending but still think ABF's profits will rise this year, estimating earnings of £1.5bn, up 1% compared to last year, mostly because of Primark's profitability.
As the first half top-line numbers are mostly known, there will be a focus among investors on updates on recent trading and the outlook for the rest of the financial year.
Aarin Chiekrie, analyst at Hargreaves Lansdown, sais: “While inflation looks like it could be near its peak and some commodity costs have pulled back, there are still plenty of headwinds to battle. The cost-of-living crisis remains a dark cloud over consumers’ heads, and ABF has already said it's cautious about potential effects on discretionary spending – which could have knock-on consequences to Primark's fortunes.”