Analysts praise “stunning” H1 performance at Primark

ANALYSIS_ Darren Shirley, a retail analyst at Shore Capital Stockbrokers, has described Primark´s half-year as “stunning and significantly above” his expectations. Shirley is not the only analyst that has praised ABF´s crown´s jewel, with the likes of Panmure Gordon also applauding

the apparel retailer´s performance.

Primark, owned by Associated British Foods (ABF), will look to build on its continued strong performance in Europe after its sales rose 14 percent to 2.3 billion pounds in the 24 weeks to March 1. Profit for the period has substantially risen, adding 26 percent to 298 million pounds.

The affordable fashion chain also announced its imminent entrance in the US market, with a first opening in Boston. Further stores are planned across the wider region through to the middle of 2016.

AB Foods Chief Executive Officer George Weston said the Primark brand is well known to Boston’s large Irish population, adding that cultural links between Boston and Ireland make the northeast of the country an ideal testing ground for the brand, published the ‘Irish Times’.

Analysts improve views on Primark on positive H1

Panmure Gordon has upgraded its rating for Associated British Foods from ‘hold’ to ‘buy’ after the company announced its intention to expand into the US.

“The stand-out news however is the announcement that Primark will enter north east US towards the end of next year,” said analysts Graham Jones and Damian McNeela.

On the wake of the news, Panmure Gordon lifted its target price for AB Foods shares from 2,760 to 3,210 pence, highlighting that the company’s interim results also came in ahead of forecasts.

“This is sooner than we had anticipated, and whilst Primark will continue its measured approach to expansion, in our view this significantly increases the growth potential of Primark.”

The company on Wednesday also reported a 10.4 percent growth in first-half earnings per share to 45.8 pence, 2.9 percent ahead of Panmure’s 44.5 pence forecast.

Primark’s US entry is “a wow moment”, summed up Andrew Wood, an analyst at Sanford C. Bernstein. Wood added that “The US clearly provides an important additional route for sustained growth from new store openings at Primark, whose success in moving into Europe has been clear.”

Stephen Springham, Senior Retail Analyst, Planet Retail, agreed with his peers, noting that “We expect some big ticks in very significant boxes with Primark’s results to-day. At the top line, group sales are likely to show double-digit growth, fuelled by healthy like-for-like advances that the likes of Marks & Spencer and Debenhams currently can only dream of. At the bottom line, profits are likely to have grown at an even faster rate than sales, with scale and operating efficiencies driving improvements in gross margins. So, ticks in all the key financial boxes.”

After breaking the news, AB Foods shares rose as much as 9.9 percent in London trading, the biggest gain since March 2000.