Primark owner issues dividend and eyes five-year store expansion

·4 min read
BELFAST, ANTRIM, UNITED KINGDOM - 2021/10/02: A shopper seen exiting Primark Clothing store on Donegall Place. (Photo by Michael McNerney/SOPA Images/LightRocket via Getty Images)
Associated British Foods, which also owns grocery brands such as Ryvita and Twinings, climbed as much as 7% on the day as it forecast “significant progress” in its latest trading update. Photo: Michael McNerney/SOPA Images/LightRocket via Getty Images

The owner of Primark received a boost from investors on Tuesday after it announced a special dividend of 13.8p per share, and an expansion of its store estate.

Associated British Foods (ABF.L), which also owns grocery brands such as Ryvita and Twinings, climbed as much as 7% on the day as it forecast “significant progress” in its latest trading update.

It said it aims to take its total portfolio from 398 stores at the end of the year, to 530 in five years, with a particular focus on the US, France, Italy and Iberia. It is eyeing a big push in its estate in the US to around 60 stores, from just 13 at present.

Paul Marchant, CEO of Primark, said: “Six years after we opened our first store in Boston, it’s clear that US customers, from Florida right up to Chicago, are loving the unique Primark offer.

“With our current portfolio of 13 stores trading really well, it feels like we’ve established a strong foundation from which to accelerate our expansion in the US market.”

It also announced three new store locations in the New York region today — City Point in Brooklyn; Roosevelt Field in Garden City, Long Island; and Crossgates Mall in Albany.

Associated British Foods climbed almost 7% on the day, to the top of the FTSE 100. Chart: Yahoo Finance
Associated British Foods climbed almost 7% on the day, to the top of the FTSE 100. Chart: Yahoo Finance

Combined with its final dividend, the special dividend takes the total payout for the year to 40.5p per share.

Annual sales at Primark fell 5% as national lockdowns and close closures dampened footfall. Revenue is currently still 12% below pre-pandemic levels on a like-for-like basis, the company announced.

Store closures wiped out around £2bn ($2.7bn) of sales last year.

“Our financial performance this year more than ever demonstrates the resilience of the group,” George Weston, chief executive of ABF, said.

“This comes from the strength of our brands, the diversity of our products and markets, our geographic spread, conservative financing and an organisation design that permits fast and flexible decision-taking.

“Although the possibility of further trading restrictions cannot be ruled out, we expect Primark to deliver a much-improved margin and profit next year. We are now intent on expanding our new store pipeline and investing in technology and digital capabilities to continue improving the performance of the business.”

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ABF’s food business posted strong performance during the period, with revenues rising 5% and adjusted operating profit climbing 10%. Profit at the group’s sugar division also surged 75%.

This meant that across the group, profits rose 2% to £1.01bn, with profits down 1% at £908m.

However, it warned it could implement price increases in its food divisions thanks to ongoing supply chain problems.

The company said it was “not immune” to the current crisis, which has seen rising costs of raw material, as well as higher wages.

“Our businesses are reliant on the availability of skilled HGV drivers,” it said.

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“Whilst there is currently a shortage of drivers in other parts of Europe, the USA and Australia, the situation has been exacerbated in the UK as a result of the EU exit. We continue to work closely with our major carriers and logistics partners to minimise supply chain disruption.

“The situation remains fluid and is being closely managed and monitored.”

Richard Hunter, head of markets at Inactive Investor, said: “Having weathered the storm, AB Foods seems set fair for a return to form providing that there are no further pandemic-related shocks.

“The share price has tended to show cautious rather than aggressive progress, having risen by 11% over the last year, as compared to a gain of 18% for the wider FTSE 100. However, with a following wind, Primark may be able to resume its position as the group’s jewel in the crown.

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