ASBFY Associated British Foods Plc (PK)

By Michael Susin

Associated British Foods raised its fiscal 2023 guidance for the second time on the back of robust sales growth across its categories and said it expects clothing retailer Primark's margins to improve in fiscal 2024.

The U.K. conglomerate said Tuesday that it expects adjusted operating profit--the company's preferred metric, which strips out exceptional and other one-off items--for the year ending Sept. 16 to be slightly better than previous expectations, which saw profit moderately ahead of last year's 1.435 billion pounds ($1.79 billion).

The FTSE 100 listed company said Primark revenue is anticipated to be GBP9.0 billion compared with GBP7.70 billion a year ago. Like-for-like sales growth is expected to be 9%. Primark sales growth has been driven by selective price increases, well-received ranges and strongly performing new stores, it said.

Primark's adjusted operating profit margin in the second half is expected to be slightly below 8%, and around 8% in the full fiscal 2023, with higher-than-expected stock loss from stores across the estate, and a modest amount of German restructuring costs.

The clothes retailer's adjusted operating profit margin for fiscal 2024 is expected to significantly improve on the back of lower material costs, the weakening of the U.S. dollar against sterling and the euro and lower freight costs, AB Foods said.

In the food segment, sugar's performance in the fourth quarter was better than expected, and adjusted operating profit for the full year is anticipated to be modestly above last year levels of GBP162 million. For fiscal 2024, the segment is expected make a substantial improvement in profitability, supported by an improvement in the performance of sugar.

The group added that it continues to manage inflation and drive sales despite the challenging macroeconomic backdrop.

Two other well-known European fashion retailers are also set to report sales this week. Spain's Inditex, the owner of Zara, Massimo Dutti and other fashion chains, reports first-half results on Wednesday, while Sweden's H&M reports sales on Friday.

Write to Michael Susin at michael.susin@wsj.com

(END) Dow Jones Newswires

September 12, 2023 03:47 ET (07:47 GMT)

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