Deutsche Bank reckons Associated British Foods PLC (LON:ABF) is “sweeter than it seems” following yesterday’s solid trading update.
Total sales, as well as constant currency sales, beat DB’s expectations thanks to good performance throughout the company’s various divisions, although Primark and sugar were the pick of the bunch.
“Notwithstanding Primark’s importance, the major driver of profit growth this year is sugar, where sales grew almost 40%,” Deutsche analyst Warwick Okines said in a note on Friday.
The other key business is Primark, which saw sales increase by 22% (11% on a constant currency basis) for the 16 weeks to 7 January, buoyed by “good” UK like-for-likes which DB estimates were up by 2%.
If that figure is indeed correct, it would put it ahead of other mid-market retailers such as Debenhams PLC (LON:DEB), Next Plc (LON:NXT) and Marks and Spencer Group Plc (LON:MKS).
“We think this is a good result, and expect Primark to benefit from a consumer shift to value in 2017 driven by pressure on spending power and a less promotional mid-market.”
Okines said the rest of the group – which includes a grocery and agriculture division – was also ‘powering on’, with the latter’s sales “ahead of expectations”.
The bank upped its full-year earnings per shares (EPS) forecast for the group by 1% to 119.06p, and repeated its buy recommendation and 3,200p target price.