Primark, the high street fashion chain, could be split off as a separate business from Associated British Foods (ABF), its parent group.
ABF told the stock market that the board had been considering the move which would see Primark hived off from its grocery brands such as Kingsmills and Twinings, as well as sugar and ingredients production.
The company currently trades with a “conglomerate discount” though the market felt the proposal had come years too late and sent the shares lower.
Chris Beckett, consumer staples analyst at Quilter Cheviot, said: “This isn’t to say that Primark is a bad business, it remains a stalwart of UK and European high streets, but it isn’t exactly knocking it out of the park just now.
“The consumer backdrop is weak at the moment, and this is resulting in meagre growth. This contrasts strongly to its glory days in the 2010s, when it appeared it could do no wrong.”
Primark’s opened its first store in Dublin city centre in 1969 and has been transformed under the ABF juggernaut.
For years it has been ABF’s “jewel in the crown”, driving growth through its trend-led, cheap fashion and expanding into a global estate of more than 450 shops across the UK, United States, Europe and, more recently, the Middle East in Kuwait.
However, it has been seen as a oddity in the ABF portfolio. George Weston, its chief executive, has said that splitting off has been explored prevoiusly.
The idea seems to have taken on a more serious tone with talks taking place with advisers from Rothschild & Co and Wittington Investments which is committed to maintaining majority ownership of both businesses.
Panmure Liberum reckons Primark’s implied market capitalisation is about £13.4 billion, compared with £18.5 billion for the wider group.
The proposals were unveiled as ABF reported a 26% fall in profit before tax to £1.41 billion for the 52 weeks ended 13 September. Revenue was 1% lower at £19.5bn, as growth in retail was offset by a decline in sugar following a “difficult” year for the division.
Primark, which saw sales grow by 1% over the year, saw improved trading in the second half. Howeverm chief executive George Weston warned that it expects the consumer environment in which Primark operates to “remain subdued”.
Shares in ABF closed down 62p, or 2.72%, at 2218p.
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