AB Foods suffers as Primark growth slows

By David Jones

LONDON (Reuters) - Primark stores owner Associated British Foods (ABF.L) posted a 24 percent rise in third-quarter sales on Thursday, but its shares dipped as its once fast-growing fashion store chain showed it was not immune to the consumer slowdown.

Primark, Britain's second-biggest clothing retailer after Marks & Spencer (MKS.L) in terms of sales volumes, achieved a 14 percent rise in total Q3 sales. But that was almost entirely due to new stores, with analysts saying its underlying like-for-like sales slowed to near zero from 4 percent growth at the half-year stage.

"The era of throwaway fashion appears to be coming to an end, and maybe the consumer is now buying less but trading up," said analyst Freddie George at brokers Seymour Pierce.

AB Foods, the food and retailing company 55 percent owned by the family of Chief Executive George Weston, said Primark's third-quarter like-for-like sales in the 16 weeks to June 21 were still positive but gave no figure. It said sales were hit by weak April trading due to poor weather in Britain.

"Our performance has been resilient, and we are performing very much better than the rest of the UK retail market, while we continue to go for growth with our new store openings," AB Foods Finance Director John Bason told Reuters in an interview.

Charlie Mills at Credit Suisse said it looked like Primark's third-quarter like-for-like sales were broadly flat, putting annual comparable sales on course for a 2-3 percent rise. That performance still compares favourably with M&S which revealed negative like-for-like sales and a profit warning last week.

"After a tough April reflecting weather and the timing of Easter, May and June were clearly better," he said.

AB Foods shares dipped 3.8 percent to 740 pence, making them the eighth biggest loser in the FTSE 100 .FTSE index, having lost about 14 percent so far this year in line with the index and other European food and drink stocks.