Broker snap: Exit AB Foods, investors advised

13th Sep 2010 11:14

Investors should switch out of AB Foods into Unilever following today's trading update from the sugar giant and Primark owner, advises Charles Stanley.Forecasts of a 6% increase in like for like sales at discount clothes store Primark during the 53 weeks to 18 September is down from 8% rise for the first six months. That implies a slowdown to 4% growth in the second half versus 9% the year before.Charles Stanley's Jeremy Batstone-Carr thinks it "highly unlikely" that estimates will be raised in the wake of today's update as the strong performance had been anticipated. Attention is likely to focus on cautious comments on retail operations in 2011."We now look forward to the likelihood of lowered estimates for 2011 in due course and given that the shares trade at a premium PE (price/earnings) multiple to the sector and our preferred Unilever we maintain our Reduce recommendation and continue to advise investors to switch from AB Foods to Unilever," writes the analyst.