In a highly anticipated move, Associated British Foods is splitting up its retail business from its food business.
The demerger of Primark and FoodCo is the result of an in-depth review of the company’s structure announced last fall. The demerger is expected to become effective before the end of 2027 and is subject to approvals and tax clearances, according to a Tuesday press release. ABF shareholders will have equity in both companies.
Both Primark and FoodCo will be listed on the London Stock Exchange, and FoodCo will retain the Associated British Foods name.
The split was expected.
“Let’s face it: Primark has little in common with ABF’s food empire of grocery and bakery brands,” James Watson, U.K. Partner at Argon & Co., wrote in a note at the start of the year.
“Primark’s revenue base is heavily concentrated in the UK, where growth has been largely flat. What’s more, fast fashion is facing a reckoning – grappling with online challengers like Shein and Temu undercutting on prices, while established players struggle with margin erosion and supply chain complexity,” Watson said.
The decision to split the companies was done with the approval of Wittington Investments Limited, ABF’s largest shareholder. Wittington will maintain majority ownership of both Primark and FoodCo.
ABF also released interim earnings results on Tuesday, which saw group revenue roughly flat year over year at 9.5 million pounds, or about $13 billion, while operating profit was down 7% to 657 million pounds, according to a company release.
The results reflect the first European clothing company to report softening consumer trends in Europe based on the Iran war, according to a Tuesday note from Jefferies analysts.
There is a risk to Primark sales if the conflict persists and spending deteriorates, the company said.
“We knew the first half of this financial year was going to be challenging and that’s borne out in our financial results,” George Weston, chief executive of ABF, said in a statement. “Primark continued to invest in stores and digital capabilities across all its markets to deliver its ambitious growth opportunities over the medium and long term.”
Part of that growth has included the fashion company advancing its brick-and-mortar presence in the U.S. The retailer on Monday announced the May 8 opening date of its flagship Manhattan store, which it refers to as a milestone.
"This is a landmark moment for Primark in the United States as we open our incredible new flagship at the epicenter of American fashion," Kevin Tulip, president of Primark U.S., said in a statement.
Primark in March appointed Eoin Tonge as CEO, who had been acting as interim for the past year. He was joined by Filip Ekvall from H&M Group as chief commercial officer, a newly created role. Weston will become CEO of FoodCo following the demerger.
The fashion retailer currently operates nearly 490 retail stores with around 9.5 billion pounds in annual revenue.
