Most analysts agree the planned separation of Primark (known as Penneys in Ireland) from Associated British Foods (ABF) makes sense.
Primark has become a major international retailer in its own right, and the consensus has long been that separating it from ABF’s food businesses could help ease the so-called conglomerate discount that can weigh on valuations.
However, while ABF shares have advanced slightly since April’s demerger announcement, they have nevertheless slipped some 6 per cent in 2026, and the company’s latest results show Primark faces a challenge in convincing investors that its best days are not behind it.
Primark sales rose 2 per cent to £4.7 billion in the first half, but like-for-like sales fell 2.7 per cent. The UK delivered modest growth with a 1.3 per cent increase, but continental Europe was much weaker, with sales from established stores falling 5.6 per cent.
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New stores contributed 4 per cent to overall sales growth, underlining the importance of expansion, but the performance of existing stores is harder to disguise.
Panmure Liberum said it remained “cautious on the pace of Primark’s turnaround”, identifying a recovery in like-for-like sales as central to the investment case.
On a conference call with analysts, Primark chief executive and Dubliner Eoin Tonge spoke about reinvigorating the customer proposition, with renewed emphasis on value, improvements to the womenswear range and increased marketing and digital investment.
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However, these initiatives come at a cost, with operating margins falling to 10.1 per cent. Few investors question the logic of the demerger, due by December 2027, but separating Primark from ABF will not, in itself, solve its trading problems.
