Almost 20 years in the making, fast fashion retailer Primark (known in Ireland as Penneys) will be spun out from its London-listed parent Associated British Foods (ABF) next year in the hope that it will sharpen the investment case.
Founded in 1969 and led initially by the Irish retailer Arthur Ryan, Primark has its headquarters in Dublin and is run by Irishman Eoin Tonge.
Its network spans 19 countries (including the US, Kuwait and Dubai) with 486 stores and about 80,000 employees. Annual revenues are about £9.5 billion (€10.9 billion).
It will now be separated from ABF’s mixed bag of food brands (tea, bread and sugar) and is expected to qualify for inclusion in the FTSE 100, an exclusive club in which DCC (another conglomerate breaking itself up) is the only other Dublin-based member.
Since taking over in March of last year, Tonge has been trying to sharpen its proposition, amid the impact of the cost-of-living crisis on consumer spending and the perception that value has slipped at Primark/Penneys.
European sales fell 5.6 per cent year on year in the 24 weeks to the end of February, although there have been signs of a revival in the UK.
In an interview with The Irish Times last week, when asked about the possibility of a split from ABF, Tonge (who is also a member of the ABF board) said: “Look, 95 per cent of what we’ve got to do here doesn’t change if we’re public [company] or not.”
That’s truein terms of the day-to-day workings of the shops. But there’s no point in splitting from ABF if nothing changes. The move will give Primark its own governance structure and strategic autonomy.
It might also be the catalyst to launch fully into ecommerce, against a backdrop of stiff price competition from Chinese players Shein and Temu. It has a click and collect system in the UK.
Primark could be worth £13.4 billion, valuing its estimated Ebitda (earnings before interest, tax, depreciation and amortisation) of £1.7 billion this year on Swedish peer H&M’s multiple of eight times.
The fly in the ointment could be a prolonged conflict in the Middle East and a global recession. Tonge will be hoping that US president Donald Trump can wrap up a peace deal soon and that consumers will spend, baby, spend.
