Warm September causes Premier Foods sales fall

By James Ridler contact

- Last updated on GMT

Premier Foods's sales plunged in the 13 months leading to October 1
Premier Foods's sales plunged in the 13 months leading to October 1

Related tags: Marketing, Premier foods

A warmer than average September has been blamed for a 5.4% fall in Premier Foods’s second quarter sales in the company’s trading update released today.

In the 13 weeks leading to October 1 2016, the group reported sales fell to £172.5M from £182.3M the previous year. Group sales were 1.8% lower in the first half of the year.

The warm September had a “significant adverse impact” ​on some of Premier’s key grocery categories, including a 13% decline in gravy and stocks sales volume and a 9% dip in desserts sales.

Ceo Gavin Darby said: “We are disappointed that our grocery business reported materially lower sales due to warmer weather, particularly in September.

However, he said the company was confident it would still end the year well, with a focus on customer relationships and new product development helping to balance out the fall in sales.

‘Group sales to grow’

We expect group sales to grow between 2–4% in the second half of the year and our profit expectations for the full year remain unchanged,” ​said Darby.

Premier’s Sweet Treats division had a better year, with the group posting a 6.4% rise in sales. The rise was the sixth consecutive quarter of growth for the category.

Grocery sales had fallen by 9.5% compared the same time last year – fuelled by a 12.4% plunge in branded sales – and had declined by 4% in the first half of 2016.

Premier expected its profits to be equal to the previous year’s £36M by cutting costs – particularly in marketing costs.

Surprisingly negative

City analyst Shore Capital judged the results to be surprisingly negative. Its head of research Clive Black said: “The magnitude of the weakness of Premier's Grocery division Q2 ​[second quarter] and September in particular takes us by surprise.”

Black and fellow analyst Darren Shirley questioned the strategic wisdom of Premier in city market investment. The hot September could only be blamed up to a point for the predicted drop in profits, they said.

“To our minds, Premier would have been much better seeing through its marketing plans and giving grounds to believe that an underlying sales growth rate can be achieved through pre-existing plans rather than doing so with less marketing support,”​ said Black.

He questioned the robustness of the business’s capability to delivery 2-4% sales growth in the medium-term.

Shore Capital downgraded its recommendation on Premier Foods’s stock from ‘buy’ to ‘hold’.

Premier Foods trading update – at a glance

  • 5.4% fall in total sales from £182.3M–£172.5M
  • 6.4% rise in Sweet Treats sales
  • 9.5% fall in grocery sales
  • 13% fall in gravy and stocks sales
  • 9% fall in desserts sales

Related topics: Ambient foods, Bakery

Related news

Show more

Follow us

Products

View more

Webinars