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Primark relies on cheap clothing, could increase in freight costs be of any concern to their margins.
Why has the share price not recovered though could it be other areas of the business such as sugar tax? Seems to be more pandemics in past decade so hope click and collect can capture some Primark revenue when stores close
Concerned if lockdown 3 is on the horizon. Really should have online presence.
I put a lot of money into shares in March/April 2020. One I looked at and decided not to pull the trigger was Kingfisher. Probably my biggest mistake. I'm not sure there's really the same upside there now but still might be a pretty good long term play.
Fair points made.
I like Kingfisher in retail, however that has enjoyed an incredible run
and FY 2021 profitability may not be seen again for sometime.
Consensus pre tax on KGF now at £900 million for the current full year.
It's absolutely true that retail can change quickly. No doubt there's a potential downside.
Primark has proven flexible enough to successfully crack multiple markets. M&S were rigid and so their formula was successful until the market changed. Primark's flexibility suggests they are less vulnerable than M&S ever was, and thus the likelihood of the downside materialising is, in my view, not particularly high.
There's a huge growth opportunity in the US which Primark is only beginning to exploit. The potential upside here, in my view, overwhelms the potential downside.
Primark has succeeded by undercutting the competition on price, and now they own the in-store low-price market. A huge segment of the population loves in-store low-price shopping. For someone to take that market away, they either have to be located more conveniently than Primark or beat Primark on price. Otherwise, creatures of habit will keep shopping where they have shopped in the past.
I think it's going to be extremely difficult for a competitor to be cheap enough to steal Primark shoppers. Once brand loyalty exists, you've got to win on price by enough to overcome it. The margins aren't there to do that, unless someone with very deep pockets decides to lose money for a long time to gain market share. I don't see that happening.
So the only way I can see for a competitor to steal Primark shoppers is to be comparable on price and better on location. But since Primark has so many prime locations nailed down, that's going to be a long, slow process of finding a great location, then another, then another. And I'm not sure someone with the finances to do that would decide that fighting Primark is the best way to invest their money.
I think Primark is here to stay, and has massive room for growth world-wide. If it fails, it is more likely to fail from inside through poor management, poor investment, poor product choice, than from outside. And so far I see no reason to expect the current management to fail.
All the above is only my opinion, of course. I could be reading the situation wrong, but that's my view.
ABF provide detailed guidance, all be it subject to change,
the most up to date of which is in the recent trading statement.
I will take the third point on Primark remaining popular.
The answer is don't know whether they will remain as incredibly popular
as is the case now.
What I do know is Marks once made £1 billion on pre tax annually - unfortunately
old enough to remember that.
Philip Green was King of the UK high street a decade ago, and now
what has happened to Arcadia ...
So what appears certain in retail can change every quickly.
There is little yield support - even if dividends returned to 2019 levels,
then at the current share price the yield is approx 2%.
The Weston family have a controlling stake which effectively rules out
a private equity approach or bid from someone else.
A lot of the valuation depends on whether Primark continues to remain as popular.
I'm not seeing a compelling buy case atm, but that is very much imv Only
and may be wrong.
If ABF paid out more of their earnings it might arguably generate more interest
in the shares.
Next PLC consistently buy back and cancel their shares helping to propel earnings,
which has contributed to that company's incredible longer term returns.
Indeed, protection against severe illness - my other half works in healthcare.
"Kall, Javid has COVID and been double jabbed, mild symptoms reportedly."
Yes, the jab does not provide guaranteed or full immunity. What it does provide is much greater immunity, and where the subject does catch it, lesser symptoms and less risk of passing it on.
Kall is right that there is likely to be no need for lockdown. Whether the politicians will see it that way or whether they will be driven by fear and inflict another lockdown on people remains to be seen. Hopefully they will balance the costs of lockdown in human suffering, substance abuse, suicides, and poverty vs the Covid risks. But I'm doubtful.
In the long run, I don't think further lockdowns hurt this share. Temporarily, it means less revenue/profit, but it also drives more competitors out of the market, and ABF is going to survive another lockdown, if it comes. Another lockdown would be terrible but probably in the long run increase Primark's market share. I'm very comfortable with this investment.
I'm about to enter a new phase of life that will make it hard for me to actively research my investments, but this is one I will likely continue to hold for a long time.
Kall, Javid has COVID and been double jabbed ,
mild symptoms reportedly.
Firstly, thanks for your recent and interesting post.
FWIW recent share price weakness may be growing fears
of a UK Autumn lockdown. Hopefully this does not happen.
To be fair I said..recent price action, not daily.
The recent share price, that is.
I think if you want to own shares in an online presence you'd do better at Next. We're fortunate to have a choice. If you want to invest in an online retailer, Next is (in my opinion) a great option. If you are not convinced that the whole world is going online, and that an old-fashioned bricks and mortar retailer is a good way to go, again you have (in my opinion) a great choice.
Several important factors support the Primark model. First, a lot of people just want to see before they buy. Second, there's the sizing issue -- it's frustrating to buy something and have it not fit and have to return it online, when you could have just walked into the store and tried it on.
One that isn't often talked about is rising cyber-crime. These people are getting more and more creative and sophisticated. That not only hits companies when their systems are breached, it also makes less tech-savvy shoppers more and more nervous about buying online. Every headline about data breaches and ransomware attacks just builds that nervousness. I personally expect this trend to continue, and be positive for in-store sales.
I'm quite happy for Primark to stay off-line, personally.
Don't think so, I believe Primarks non online presence is really helping pent up demand and will pay off handsomely.
Moose, the trouble is that ABF have no online sales presence to convert their social media followers to online buyers. An optimist would say that we might never have lockdowns again, but the shift of a significant portion of sales to online is permanent. ABF need to take a hit and develop an online presence, even if they kind of outsource it.
I’d say a solid performance across all divisions in very difficult circumstances. Currently 1.58% up in Frankfurt.
Primark revenues reached £1.6bn in the third quarter with the reopening of all stores and the opening of seven new stores. These revenues were well ahead of last year's third quarter sales of £0.6bn, when the first lockdowns resulted in the closure of all our stores for an average period of 12 weeks. This quarter, sales in the reopened stores were ahead of expectation in all markets, a number of new sales records were set and the like-for-like1 performance was much improved on earlier periods during this pandemic reflecting an increase in both confidence and willingness to spend by our customers. Primark's like-for-like1 sales were 3% up on a two-year basis in the quarter, but volatility remains high and performance varied by region depending on the degree of restrictions related to COVID-19. Data for the total UK clothing market, which includes online sales, for the seven-week period after reopening shows both volume and value share gains for Primark on a two-year basis.
https://www.lse.co.uk/rns/ABF/trading-update-5b74evpalm0b4p6.html
Hi,
Were there any 2020 divis that were announced, payed out and then clawed back from share holders/cancelled after they went xdividend but before payment date due to the pandemic, if so I would appreciate it if you tell me the xdivi date and the exact divi in pence,
Thanks.(you can't see any divis for 2020)
Nice to see Uncle_Doug back with a negative comment about Primark. Seems a likely sign of an impending price rise, but even if it isn't, it's at least reassuring that some things never change. LOL.
Dunno about capex but I was in our biggest city centre Primark 2 days ago and I was the only customer in there. First few days after retail opened were good but now footfall is awful. Online seems to have taken away so many customers.
I'd suggest if you are investing in ABF for the current dividend, you are doing it wrong. You should only be investing here if you are looking for a safe and steady company with some definite growth potential. If you want dividends, find a different company.