In-Line Fiscal Q3 Trading Update for Associated British Foods and Exciting Developments for Primark

A potential change of tack for Primark’s online strategy was a promising takeaway from no-moat Associated British Foods’ fiscal third-quarter 2022 trading update, that otherwise tracked our full-year expectations. ABF announced the launch of a click-and-collect trial for Primark’s children's range in 25 stores of varying sizes in the U.K. Management expects a corresponding uplift in sales from the broader assortment available online and the additional purchase occasions, created when customers pick up orders in store. The jury is out on the economic viability of the model owing to the increased cost of picking and additional deliveries to stores, and the limited scope of the rollout. Nonetheless, we believe it is a step in the right direction strategically as the retailer’s subpar website and lack of online sales could curb its long-term growth potential. ABF shares screen at an attractive 26% discount to our unchanged GBX 2,200 fair value estimate.