Associated British Foods Raises Fiscal 2023 Guidance, Expects Improvement in Primark's Margins
Associated British Foods has raised its fiscal 2023 guidance for the second time due to strong sales growth across its categories. The conglomerate has also stated that it expects clothing retailer Primark's margins to improve in fiscal 2024.
Adjusted Operating Profit
Associated British Foods predicts that its adjusted operating profit for the year ending on September 16 will be slightly better than originally expected. The company had previously forecasted profit to be moderately ahead of last year's £1.435 billion.
Primark's revenue is anticipated to reach £9.0 billion compared to £7.70 billion last year. Like-for-like sales growth is expected to be 9%. This growth has been driven by selective price increases, well-received ranges, and the strong performance of new stores.
Adjusted Operating Profit Margin
In the second half of the fiscal year, Primark's adjusted operating profit margin is expected to be slightly below 8%. However, for the full fiscal year 2023, it is projected to be around 8%. These estimates account for higher-than-expected stock loss from stores and a modest amount of German restructuring costs.
For fiscal 2024, the adjusted operating profit margin is expected to significantly improve. This will be supported by lower material costs, the weakening of the U.S. dollar against sterling and the euro, and lower freight costs.
In the food segment, sugar's performance in the fourth quarter exceeded expectations. As a result, adjusted operating profit for the full year is anticipated to be modestly above last year's levels of £162 million. Looking ahead to fiscal 2024, the segment is expected to see a substantial improvement in profitability, driven by an improvement in the performance of sugar.
Despite the challenging macroeconomic backdrop, Associated British Foods continues to manage inflation and drive sales.
Upcoming Sales Reports
This week, two other well-known European fashion retailers will be reporting their sales. Spain's Inditex, the owner of Zara, Massimo Dutti, and other fashion chains, will report its first-half results on Wednesday. Sweden's H&M will report its sales on Friday.