Associated British Food PLC’s (LON:ABF) Primark stores have managed to grow sales in recent months and years despite a weakening UK consumer environment.
That resilience is what makes it “one of the stronger apparel retailers,” according to the Royal Bank of Canada.
The mid-level bank does have concerns about how long those sales can continue to rise though, with the lack of any kind of online store and a hard-to-crack US market being its main bugbears.
“We think [Primark’s] high volume densities may be becoming a constraint to LFL sales growth, it lacks a transactional online offer and we think it will take a long time for it to reach critical mass in the US, where it lacks brand recognition,” wrote analyst Richard Chamberlain.
As a result, the analyst has lowered his underlying forecasts for the value clothes retailer by 3%, owing to weaker like-for-like sales assumptions which he now expects to be flat next year (versus previous estimate of +1.5%).
Chamberlain has also trimmed its underlying earnings forecasts for ABF’s sugar division on the back of lower prices of the sweet stuff.
All in all, he has cut his rating to ‘sector perform’ from ‘outperform’, while his price target has fallen to £31 from £35.
ABF shares dipped 2.3% to £27.97 early on Tuesday.