Primark owner set for higher sales despite Omicron concerns

Primark owner Associated British Foods (ABF) is expected to post higher sales as customers continue to flock back to the fast fashion chain following periods of enforced closures.

FTSE 100 firm ABF, which also operates a raft of grocery and agriculture businesses, said last month that recent trading had been better than expected.

However, shareholders will be keen to hear how it has performed in recent weeks when it gives the market a festive update on Thursday January 20.

The company will be expected to reveal how Primark has fared in the face of softening high street footfall due to soaring Covid-19 cases, driven by the spread of the Omicron variant of the virus.

Analysts expect ABF to highlight stronger sales in the first quarter of its financial year, which began in late September, although suggested that the firm could see challenges in Europe.

Michael Hewson, chief market analyst at CMC Markets UK, said: “Expectations for Q1 are expected to be ahead of equivalent sales a year ago, although that wouldn’t be difficult given that most stores were closed.

“The retailer is also facing challenges from the increase in restrictions and lockdowns imposed in the Netherlands and Austria, as well as vaccine passes in Germany.

“Lower footfall is also likely in the UK in the lead-up to Christmas as consumers exercise caution lest they pick up Covid and have to isolate over the holiday break.”

However, the retailer could have cause for optimism after rival Next posted a profit upgrade last week following stronger than expected sales and reported an increase in demand for party-wear.

Primark has also come under increased pressure from the pandemic than rivals due to its lack of an online operation but told shareholders in September that it planned a new digital strategy with increased investment.

Shore Capital analysts Clive Black and Darren Shirley said: “Primark remains a powerful and great business that has growth ahead, whilst its digital journey is now more demonstrably moving in the right direction.

“More broadly, perhaps Allied Bakeries aside, the balance of ABF Group is also quite simply good businesses.”

The group’s grocery business is also expected to have been bolstered by caution among consumers over recent weeks, which revealed a rise in grocery demand as people switched away from restaurants and pubs.