AB Foods shares saw a surge in early trade on Tuesday, surpassing the FTSE 100 index. The company announced a new share buyback program, a special dividend, and expressed optimism about the recovery of margins at its retailer arm, Primark.
At 08:46 GMT, shares were up 5.9% or 124.0 pence, reaching 2,234.0 pence. Following AB Foods' statement, UK retailers Next PLC, Marks & Spencer Group, and Frasers Group also experienced increases in their share prices - 2.0%, 1.4%, and 3.3% respectively.
AB Foods revealed its plan to repurchase £500 million ($617.1 million) worth of shares. This comes after the completion of a £500 million buyback program in October.
Additionally, the company announced a special dividend of 12.7 pence per share, bringing the total dividend to 60.0 pence per share - a nearly 40% increase compared to last year.
AB Foods is optimistic about the recovery of Primark's adjusted operating profit margin, attributing it to lower material and freight costs. The company stated, "At this early stage, we believe that the adjusted operating profit margin will be above 10%, with further improvement contingent upon levels of consumer demand." It also mentioned the easing of inflationary pressures and decreased volatility compared to the previous year.
The consumer environment remains challenging, but AB Foods is confident that these developments will positively impact its performance.