Associated British Foods (ASBFY) surged to the top of the FTSE 100 Tuesday after posting strong sales at its Primark fashion retail brand and beating analysts' expectations for full-year profits.
Primark, which is attempting to take on fast-fashion retailers Zara and H&M (HNNMY) , saw sales rise 9% last year to £5.9 billion ($7.33 billion) in the 53 weeks ended September 17.
AB Foods said company-wide revenues for the full year rose 5% to £13.4 billion, or 4% on a constant currency basis, beating the £13.2 billion consensus provided by FactSet. Operating profit, the group said, rose 3% year-on-year to £1.1 billion. The company also said it expects to see progress in adjusted operating profit and earnings for the coming year, despite a negative impact from the fall in the pound.
Shares in the group surged more than 8% in London to change hands at a two-and-a-half month high of 2,688 pence each. Year-to-date, however, the shares have fallen by around 20%.
Primark, which makes up the majority of the AB Foods' business, saw a 2% decrease in same-store stores due to adverse weather but was boosted by a 9% increase in retail space throughout the year, the company said.
AB Foods continued its expansion into the U.S., saying that it now has a better understanding of what appeals to American customers and are "gaining valuable insight into store locations."
"Primark now trades on attractive implied valuation of approx. 19.2x cal17E P/E, a discount to global retail peers Inditex and H&M," analysts at Liberum said in a client note. The brokerage rates AB Foods as a buy with a target price of 3,500 pence.