AB Foods (ABF) is split into five rather different divisions, Sugar, Agriculture, Retail, Grocery and Ingredients. By far the largest of these is Retail or more accurately, Primark, a budget fashion retailer. Primark is unique in that it currently doesn’t have any form of online presence and operates solely out of a store estate. This strategy splits opinion amongst investors.
Bears will say that shopping is rapidly shifting online and Primark aren’t going to be able to compete with online giants such as Amazon. If you listen to some pundits, the high street is said to be “dead”. We have seen Toys R Us and Maplin plunged into administration, New Look announce that it has shut 60 stores and cut almost 1,000 jobs and most recently, Next has reported multiple store closures.
The bulls would argue that Primark’s differentiated offering should allow them to continue to survive on the high street in an increasingly competitive environment. Given the expense of delivery costs, it is impossible to sell a £2 t-shirt at an acceptable margin online. In addition to this, we are increasingly hearing that shoppers are looking for an “experience”. Primark offer this through what can best be described as a treasure hunt for the hidden gems in their shops amongst their other ludicrously cheap options.