Associated British Foods (ASBFY) saw shares surged to the top of the FTSE 100 in early Thursday trading after it reported double-digit growth at its low-cost clothing retailer Primark and upgraded its full-year outlook.
Shares in the conglomerate, which has business units focused on sugar and groceries as well as its Primark unit, were marked 5.77% higher in the first half hour of trading and changing hands at 3,084 pence.
ABF said group revenue was up 10% in the 40 weeks ended June 24 at a constant currency, and 20% ahead at actual currency. In the third quarter, group revenue was 13% up at constant currency and 20% at actual currency.
The company said it has benefited from the devaluation in the pound since the June 2016 vote to leave the European Union, but expects that boost to diminish in the last quarter of their financial year.
ABF also upgraded its outlook for the year. "The underlying operating performance of the group during the third quarter was ahead of our forecast as a result of a stronger profit delivery from Primark which has marginally improved our group outlook for the full year," the company said. "We continue to expect to report good growth in adjusted operating profit and adjusted earnings per share for the group."
Sales at Primark were up 13% in the first three quarters of the year driven by increased retail selling space and growth in like-for-like sales. At actual exchange rates sales continued to benefit from sterling weakness and are 21% ahead year to date, the company said.
Third quarter trading was particularly strong for the low-cost retailer, with like-for-like sales stronger than the first half of the year, the company said, without giving exact numbers.
Primark is intense competition with other retailers such as H&M Hennes & Mauritz (HNNMY) , to get consumer dollars.
Primark performed particularly well in the UK where year to date sales are 9% ahead of last year and we continued to increase our share of the total clothing market.
The first half operating profit margin of 10% declined from 11.7% in the first half last year, reflecting the strength of the U.S. dollar on input costs. ABF had warned that margins would be hard hit in the second half due to currency hedges, but "with the benefit of improved input margin mitigation and lower markdowns, we now expect the full year margin and the rate of decline to be in line with the first half."