RBC Capital downgrades Primark owner AB Foods

(Sharecast News) - RBC Capital Markets downgraded Primark owner Associated British Foods on Wednesday to 'sector perform' from 'outperform'. "We see potential for Primark to continue to take share on account of its space expansion, and its gross margin outlook looks encouraging," the bank said,

"But our surveys suggest that price perception is a concern. Meanwhile, ABF's food businesses are likely to remain a mixed bag, dragged down by Sugar. As such we think an implied conglomerate discount is justified and we have reduced our rating to sector perform."

The bank, which kept its price target at 2,150p, said it recently published a report looking at the price perception of various apparel retailers across key European markets based on consumer surveys conducted in 2015 and 2025.

One of the key findings was that Primark's perceived price position has increased noticeably since 2015 in most key markets.

"In the 2015 survey, Primark was regarded as the cheapest apparel retailer by consumers in several markets, whereas in this year's survey it often occupied a more mid-market position," it said.

"Although this increase in price perception was often accompanied by an improvement in customer views on quality and style, we are concerned that Primark may be at risk of losing some of its value-for-money credentials."

At 1010 BST, the shares were down 1% at 2,070p.