Primark-owner cautious on consumer spending after profit fall

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LONDON, April 25 (Reuters) –

Primark-owner Associated British Foods on Tuesday reported a 3% fall in first-half profit and kept its guidance for a flat outcome for the full year, staying cautious about the resilience of consumer spending in an economic downturn.

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The group, which also owns major sugar, grocery and ingredients businesses, said adjusted operating profit, its key profit measure, was 684 million pounds ($854 million) in the six months to March 4, on revenue up 21% to 9.56 billion pounds.

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“At Primark, we remain cautious about the resilience of consumer spending in the face of ongoing inflation in the cost of living and higher interest rates,” it said, forecasting a moderation in like-for-like sales growth in the second half.

Its shares, which have increased 31% so far this year, fell 3.8% in early deals.

UK households are in the midst of the biggest two-year squeeze in living standards since comparable records started in the 1950s, according to government forecasters.

The group said it was focused on passing on some of its higher raw material costs to customers, although it noted that inflation had become less volatile, with the price of some ingredients starting to ease.

For the full 2022-23 year, the group expects adjusted operating profit broadly in line with the 1.44 billion pounds made in 2021-22.

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Full-year profit in the grocery business, which includes the Twinings tea, Jordans cereals and Ovaltine drinks brands, was forecast to be ahead of the previous year, benefiting from price rises and cost savings.

Ingredients profit was forecast to be “well ahead” of 2021-22 but profit was expected to be down at AB Sugar due to much lower UK sugar production.

Primark, a value-focused fashion retailer, ended the first half with 419 stores, including 16 in the United States.

The group said it planned to expand Primark into the southern states of the U.S. anchored by a new warehouse in Jacksonville Florida.

AB Foods said it would pay an interim dividend of 14.2 pence a share, up 3%. ($1 = 0.8013 pounds) (Reporting by James Davey; Editing by Kate Holton and Paul Sandle)