Primark owner AB Foods updated the market today and investors were not so impressed. AB Food is a rarity in that it has one foot in the grocery business and one in retail; however, it is the retail side that grabbed trader’s attention on Monday and for the wrong reasons.
Despite the headwinds highlighted in the results, there are still reasons to be bullish this stock:
1) AB Foods is a very diverse business type and with a diverse geographical footprint which enables it to balance out volatility
2) Primark’s discounted offering is appealing in a period of economic uncertainty, low wages and growing concerns of a slowdown.
Negatives to watch:
1) Discounted, high product turnover clothing stores are under increasing environmental scrutiny. This could negatively impact AB Foods going forwards.
2) Currency headwinds are expected to reduce Primark margins next year.
AB Foods levels to watch:
The share price is down close to 3% on the day after breaking through support at 2300. Strong support can be seen at 2250. A breakthrough this level could open the doors to 2000, its low at the turn of the year. On the upside a break through 2400 could negate the bearish trend which has been in play since May.
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