Shares of Associated British Foods plc (LON: ABF) are down almost 15% this year after the company reported lower grocery sales figures compared to last year when the UK was under the first wave of lockdowns.
The British multinational food processing and retailing giant lifted its earnings guidance for the fiscal 2021 year driven by a jump in Primark sales during the sixteen weeks to Juen 19.
ABF revealed that its retail segment recorded a 207% jump in revenues driven by the surge in Primark sales as UK retail stores reopened to an enthusiastic reception from consumers.
However, the company warned that Primark sales were prone to significant volatility in case of further lockdown measures in the UK, leading to store closures.
ABF also has a huge debt burden of £440 million as of February 2021, which reduces its attractiveness. Luckily the retailer also has a net cash position of £1.15 billion.
Furthermore, the company generates free cash flows equating to 57% of its gross earnings, matching industry trends.
Traders looking to establish new bullish positions in the UK retail giant may be best served to wait for several bullish days before moving forward.
Meanwhile, at current prices, ABF shares are trading off the 1900p level and could bounce off this crucial level creating an opportunity for the bulls.
*This is not investment advice.
Associated British Foods (ABF) share price.
ABF shares are down 14.95% this year as investors focus on the nine-month falling revenues.
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