With reopening, pent-up demand is now being unleashed at fashion retailer Primark. That could lead one to think the Primark share price is worth looking into.
But I won’t find a Primark share price in the financial news.
Below I explain why that it is – and how I’d try to benefit from Primark’s performance.
Private company
The Primark share price doesn’t show up anywhere because it is not a listed company. That means its shares are not publicly traded on a stock exchange.
The company is wholly owned by Associated British Foods (LSE: ABF).
That explains why there is no such thing as a Primark share price published. But – if I wanted to benefit from Primark’s business performance, an investment in ABF could offer some exposure.
Diversified conglomerate
ABF is a well-established conglomerate. As its name suggests, its historical focus has been on food. It owns brands such as Ryvita and Ovaltine.
But it is not just a food producer. For example, it has a pharma business called SPI Pharma – and Primark.
ABF estimates that last year Primark lost £2bn in sales and around £650m in profits due to the pandemic. But it still managed to record a £362m adjusted operating profit in the period.
Normally, Primark is an even stronger contributor to ABF. For example, in 2019, Primark accounted for £7.8bn of revenue, 49% of ABF’s total revenue. Primark’s adjusted operating profit of £913m that year was 64% of ABF’s total.
So Primark has typically been the largest part of the ABF business and an outsized profit contributor. Clothing retailers can suffer from trend changes, though. That is a risk for Primark and by extension for ABF – as is the physical store focus at a time when many clothing purchases are made online.
Would the ABF share price reflect the Primark share price?
I think buying into ABF would offer me substantial exposure to the Primark business performance. That is because the retailer is a large part of ABF’s overall business.
However, buying shares in ABF is different to the concept of investing directly in Primark. As an ABF shareholder, the value of my shares would reflect market sentiment on the whole company, not just Primark.
Sometimes that conglomerate structure might help me. Last year, for example, Primark sales slumped but both revenues and profits grew in ABF’s grocery and agriculture divisions.
But in other years, a strong performance by Primark could be tempered by weakness elsewhere. For example, market pricing for sugar can be volatile. That can drag down profits at ABF as it owns sugar brands like Silver Spoon and Billington’s. Cyclical food pricing is a risk for ABF shares.
I’d consider ABF shares
There is no Primark share price I can use to invest in the clothing chain. Buying ABF shares is not a proxy for buying Primark shares.
However, I’d still consider investing in ABF. Primark is a strong brand and has a proven business model. The company’s food brands are well-known. Combining both can help take the edge off bad performance in one of the businesses. It would also give me some exposure to the Primark business.
There are risks, though, including rising input costs damaging food margins, shifts in consumer tastes hurting sales, and further lockdowns dragging down Primark sales again.
