ABF In Focus Ahead Of Trading Update

Fiona Cincotta July 1, 2020 8:13 AM

Thursday 2nd July Associated British Foods is set to update the market over the impact of the lockdown and how initial trading is faring after stores reopened

Charts (4)

Primark owner ABF is expected to update the market today. The update comes just over 2 weeks after British government eased lockdown restrictions and stores reopened, albeit with strict social distancing measures in place. The 2-meter rule is also set to be reduced further this weekend, meaning that stores will be allowed more shoppers to enter at anyone time which is good news for business.  

Investors will look forward to knowing the extent of the damage from the lockdown and how initial trading has been faring.  A combination of the UK heading for its worst recession in 300 years, combined with consumers tired of being locked up for 3 months means price will be more important than ever for consumers as they hit the shops. 

With this in mind, Primark’s accessible pricing means that it is well positioned coming out of lockdown to attract those keen to start buying non-essential items after a 3-month hiatus without breaking the bank.

The groups’ strong financial position, liquidity and solvency has also meant that the firm is expected to emerge from the coronavirus pandemic in a reasonable condition, although its lack of an online presence will have held it back.

With no online presence and fears of a second wave of coronavirus growing, the prospect of closing stores again, could weigh on the share price and limit gains and even see the share price drop sharply, should localised lockdown be implemented on a widening scale.

The pandemic raises questions over Primark’s store only strategy and its absence of an online store. The recent lockdown and possibility over future lock downs raises the question whether Primark will look to increase its online presence a move which would be particularly useful if lock down and localised lockdowns become more common.

Chart thoughts
Primark is trding down -20% year to date. It trades above its 50 day sma, a support which has held since the beginning of June. The stock continues to trade below its 100 day sma a level which offers strong resistance at around 2000p. This is a level which the stock has failed to trade over since 10th June.
A break above 2000p could open the door to resistance at 2140p (June high).
On the flip side, a breakthrough the 50 sma around 1865p could open the door to 1840p (June low) prior to 1740p (low 26th May)


TAGS:
Equities

More from Equities

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.