Associated British Foods toasts US success and Persimmon talks up first-time buyer assistance

“After all the excitement of the past week on the market, the FTSE 100 finally took a breather and was unmoved at 7,610 on Thursday,” says Russ Mould, Investment Director at AJ Bell.

“Many of the biggest fallers on the blue chip index were stocks trading without the rights to their next dividend including International Consolidated Airlines and Coca-Cola HBC.

“Helping to offset these declines was strength among telco Vodafone and cigarette maker British American Tobacco.

“European markets were also quiet and US markets will be closed for Independence Day."

Associated British Foods

“In a turbulent market for retailers, Associated British Foods’ Primark chain has managed to crack on unperturbed with increased selling space helping to offset the negative impact of bad weather in May.

“Primark’s expansion in the US appears to be going well. This is a major positive given how British retailers have notoriously struggled to crack the American market. Tesco, Dixons and HMV are good examples of retailers jumping over the pond only to subsequently do a U-turn.

“Overseas expansion can be a drain on management time and many companies underestimate the cost of breaking into a new market and the intensity of competition.

“Primark’s low value point should work in its favour in the US, particularly as more middle-income consumers in the country now shop at discounters and budget stores.

“As for the non-clothing part of Associated British Foods, it’s the same old story: sugar is keeping its chin up after a very tough time, grocery sales are quietly pushing ahead, the ingredients arm is doing well and the agriculture business is growing revenue but fighting margin pressures.

“The benefit of having a conglomerate structure is that the good parts can help to cushion the bad bits – and that’s certainly the case with Associated British Foods’ latest announcement.”

Persimmon

“Housebuilder Persimmon is pulling out all the stops to prove how important it is to the first-time buyers’ market. A trading update talks about how it is helping more first-time buyers on to the housing ladder than any other UK housebuilder and how customer satisfaction is improving.

“A cynic would suggest this is Persimmon’s way of trying to convince the Government that it shouldn’t be stripped of its right to sell Help to Buy homes following allegations of poor standards and hidden charges.

“The trading update reveals that sales volumes have fallen as a result of Persimmon’s decision to sell homes at a more advanced stage of construction. It has also been trying to improve build quality – more initiatives as part of Persimmon’s efforts to rebuild its tainted reputation.”

These articles are for information purposes only and are not a personal recommendation or advice.