Broker snap: Caution remains over Primark sales at AB Foods

28th Feb 2011 15:10

While Associated British Foods (AB Foods) seems on track for 2011, RBS remains cautious as Primark's sales have clearly slowed.. The Primark owner's first half trading update indicates its overall performance has been 'in line' with operating profit ahead of last year, and financing costs on target. However, the broker expects the key feature the market will focus on will be the slowdown in Primark's sales. For the first 16 weeks of the current financial year, the division achieved a sales growth of 12% and a like-for-like (LfL) growth of 4%, but AB Foods now indicates that for the 24-week period, sales will be 11% ahead overall and just 3% higher in LfL sales, suggesting a slowdown in the past two months.Though RBS expects this to be offset by a better Sugar performance and pension financing, it sees this mix as negative from a valuation perspective.The broker retains its 'hold' and target price of 1,030p.