Retail and food ingredients business Associated British Foods may not have produced any upgrades in its latest trading update but the mood around the company is one of optimism.
Talk of resilient consumer demand and inflationary pressures settling is telling and its Primark retail chain had a good Christmas.
Russ Mould, investment director at AJ Bell, said: “Its reliance on physical stores meant the pandemic was a big issue for Primark and a festive period without restrictions clearly helped get shoppers through the doors. It was notable to see this part of the business perform ahead of expectations.
“The fact this has not resulted in a change in guidance reflects continuing pressures on margins across all parts of the group which may have proved a bit of a disappointment to investors.
“Having avoided any meaningful web-based presence for so long, Primark is stepping up its click and collect trials.
“There’s logic to this approach as it allows Primark to benefit from impulse purchases as customers are still visiting the stores and avoids incurring big costs around delivery and returns of what tend to be very cheaply priced products.
“The budget proposition at Primark could help it secure new customers as cost-of-living pressures bite – particularly in areas like children’s clothes where parents make frequent purchases and the longevity of what they buy might be less of a consideration.
“The company itself certainly scents an opportunity as it continues to roll-out its store estate, encouraged by the fact newly opened stores are performing well.”
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