* Primark UK first half like-for-like sales up 2 pct
* Says UK consumer "not pulling back"
* Group maintains full year guidance
(Recasts with finance director, analyst comment, shares)
By James Davey
LONDON, Feb 27 Associated British Foods,
owner of discount fashion retailer Primark, said on Monday it
was not seeing any signs that British consumers were starting to
rein in spending, contradicting official data which has pointed
to a slowdown.
Shoppers have driven growth in Britain's economy since the
country's vote in June to leave the European Union. But they are
widely expected to turn more cautious as prices rise following
the fall in the value of the pound after the referendum.
Official data released earlier this month showed shoppers
bought less in January while inflation hit its highest level
since mid-2014 at 1.8 percent.
However, AB Foods said Primark's sales at UK stores open
over a year would be up 2 percent in its first half, which ends
on March 4, and it had won market share. Primark competes with
firms such as Next, TopShop and Marks & Spencer.
"There is not an indication of people pulling back at this
stage," Finance Director John Bason told Reuters.
"The consumer in the UK has got more disposable income this
year than they had a year ago - fact," he said.
Bason noted that while inflation is picking up it remained
below 2 percent.
"That's where we are at this stage, the full effect of the
devaluation of sterling still has to play through."
AB Foods said total first-half sales at Primark were
expected to be 11 percent higher than last year at constant
currency, driven by increased retail selling space, and 21
percent ahead at actual exchange rates - a similar performance
to the first quarter outcome.
Primark accounts for about half of AB Foods' profit.
The group maintained its full-year earnings guidance with
the growth at Primark supported by better performances in its
sugar, grocery, agriculture and ingredients businesses.
"This is an example of a business that’s firing on all
cylinders," said Bason.
He reiterated, however, that Primark's operating profit
margin in the first half will decline, mainly reflecting the
strength of the U.S. dollar on input costs.
The group said it still expected progress in overall
adjusted operating profit and adjusted earnings per share in its
2016-17 year, after seeing "excellent progress" in the first
It made adjusted operating profit of 1.12 billion pounds
($1.39 billion) in 2015-16, with adjusted earnings per share of
Analysts on average forecast adjusted EPS of 118.5 pence for
2016-17, according to Reuters data.
Shares in AB Foods, a majority of which are owned by the
family of Chief Executive George Weston, have fallen 23 percent
over the last year but have risen 8 percent over the last month.
They were down 0.7 percent at 2,593 pence at 0942 GMT,
valuing the business at about 20.7 billion pounds.
Richard Chamberlain, analyst at RBC Europe, reiterated his
"outperform" rating for AB Foods, highlighting its potential for
double-digit EPS growth, Primark's international roll out and
the group's strong balance sheet.
($1 = 0.8057 pounds)
(Editing by Kate Holton and Susan Fenton)