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GB : Associated British Foods - Strong initial trading post re-openings

Primark delivered record sales in the first week of re-opening of stores in England and Wales last week, with total footfall for the whole estate back to pre-pandemic levels. 1H’21 results were expectedly impacted by trading restrictions, with group sales down 17% yoy and operating profits down 46% yoy (-90% at Primark). With stores re-opening and liquidity remaining strong (net cash of £705m excluding lease liabilities as at the end of 1H’21), Primark has decided to repay furlough costs of £121m and reinstate an interim dividend of 6.2p. Management maintained an optimistic outlook for Primark space expansion, highlighting a strong pipeline in Europe and plans to aggressively expand in the U.S. over the next five years. In our view, the Primark proposition remains highly relevant and resonates even with today’s digitally native consumers, and we believe the upheaval in retail caused by the pandemic will provide opportunities to accelerate store openings and take market share. Reiterate BUY.


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