Associated British Foods PLC’s (LON:ABF) Primark is underestimated for its potential during the current economic crisis, according to RBC Capital Markets.
The fast-fashion retailer also has a bright margin outlook for 2021 thanks to the US dollar weakness against sterling and euro.
READ: Associated British Foods’ Primark is set to play catch-up says RBC
Analysts expect ongoing improvements in cashflow due to lower capital expenditure and working capital intensity, with fewer new stores opened and less inventory tied up in stores.
Sales trends in July and August are expected to be slightly better than May and June, while UK trading is likely to see an early autumn boost from cooler weather compared to last year.
“We think the market has underestimated the extent to which Primark's low prices position it well in a consumer downturn and act as a competitive barrier to online players,” the Canadian bank said.
Parent AB Foods was trading 1% lower at 2,030p on Tuesday at noon.