Associated British Foods’ grocery sales have been sluggish in recent years, but this week the division was a star performer. After growing just 1% in the first half of the fiscal year, ABF said its third-quarter grocery sales had increased 7%. Improved grocery sales, coupled with a 20% hike in Primark sales, helped ABF grow its group sales by 8%.
Some analysts had feared a weaker performance from Primark because of the cold spring weather. “Net-net, this feels like a reassuring statement relative to the pre-event debates and uncertainties,” said Investec analyst Martin Deboo. Panmure upgraded its rating on the stock. “With Primark’s pipeline of store openings looking particularly impressive, we are moving our forecast from hold to buy,” said Panmure analyst Graham Jones. Shares in ABF climbed 4% to 1,888p in morning trading on Thursday.
New business drove the sudden improvement in grocery sales. After winning the contract from Premier Foods, ABF’s Allied Bakeries business started supplying bread to 4,000 Co-operative Group stores in April. According to Deboo, the lost contract could shave £15m, equivalent to 2% of group sales, off Premier’s first-half sales, which are published on 23 July.
But this week, there was more positive news regarding Premier’s bread division. It announced plans to split its milling operations into two divisions. One will supply flour to Premier and the other will focus on third parties. As part of the restructuring, Premier also said it would close its mill in Barry, Glamorgan. The news pushed the shares up 3.9% to 66.75p on Wednesday.
On Tuesday, Marks & Spencer reported a 0.3% increase in first quarter like-for-like UK sales. Food sales increased 1.8% despite a lack of events on the scale of last year’s Diamond Jubilee, but general merchandise sales fell 1.6%, even though the division was lapping a poor quarter last year, when sales plunged 6.8%. M&S shares dipped 1.4% to 453.2p on the news.
Booker also reported disappointing quarterly sales this week. The wholesaler recorded a 1% increase in total like-for-like sales, which represented a slowdown on past quarters. But it was facing a tough comparison with last year, which included the Diamond Jubilee bank holiday. Booker’s shares slipped 1.3% to 128.6p.