Will ABF keep beating Tesco, Sainsbury’s, Next and Morrisons after H1 update?

Do Associated British Foods plc (LON:ABF) (ABF.L) shares have more investment appeal than shares in Tesco PLC (LON:TSCO) (TSCO.L), J Sainsbury plc (LON:SBRY) (SBRY.L), Next plc (LON:NXT) (NXT.L) and WM Morrison Supermarkets PLC (LON:MRW) (MRW.L)?

Associated British Foods plc
Associated British Foods plc

Associated British Foods plc (LON:ABF) (ABF.L) has released an H1 update to the stock market. It shows the underlying growth of the company was strong in constant forex, which has pushed the ABF share price 2.9% higher.

ABF’s group revenue was 7% up at constant forex, with a rise of 19% at actual forex rates. Adjusted EBIT was 23% higher at constant forex and up 36% at actual exchange rates. This result was aided by the substantial increase in selling space at Primark which together with its strong consumer offering contributed to a further increase in the company’s share of the total clothing market.

ABF also achieved a more acceptable rate of return according to today’s update in the Sugar business, with further progress made by its Ingredients and Grocery businesses. Statutory operating profit was 36% higher at £640 million and when the benefit of a profit on the sale of businesses is added, PBT was 92% higher at £867 million and basic earnings per share rose 79% to 80.5p.

In the last 6 months, the ABF share price has risen 12%. That’s ahead of the performance of other retailers such as Tesco PLC (LON:TSCO) (TSCO.L), J Sainsbury plc (LON:SBRY) (SBRY.L), Next plc (LON:NXT) (NXT.L) and WM Morrison Supermarkets PLC (LON:MRW) (MRW.L). Tesco is down 17%, Sainsbury’s is up 9%, Next shares are 12% lower and Morrisons shares are flat.

In my view, ABF has investment appeal over a long period. I feel Tesco, Sainsbury’s, Morrisons and Next are preferable stocks to own on valuation grounds, but ABF may have greater diversity. Therefore, I think the outperformance of ABF shares seen in the last 6 months may not be sustained, which makes me more bullish on other companies in the retail sector, such as Sainsbury’s, Morrisons and particularly Tesco and Next.