Analyst Note| Ioannis Pontikis, CFA |
Associated British Foods reported a trading update prior to entering the close period for its interim results for the 24 weeks to Feb. 27. Primark’s sales for the half year are estimated to be GBP 2.2 billion compared with GBP 3.7 billion a year ago, or about 40% down, behind the 30% decline expected by VA consensus. The group expects Primark's adjusted operating profit to be “marginally above break-even” versus GBP 441 million a year ago, as expected. At the time of writing, ABF is trading in 77 stores, representing 22% of its retail selling space. Nonetheless, it still plans to add a net 0.7 million square feet of retail space, which we think reflects management's confidence in the brand's ability to recover, in line with our expectations (0.73 million square feet in our model). We do not expect to make significant changes to our GBX 2,350 fair value estimate. With increased uncertainty around restrictions and the stock already trading in 3-star territory, we would advise investors to wait for a better entry point.