Australia markets closed

Associated British Foods plc (ABF.L)

LSE - LSE Delayed price. Currency in GBp
Add to watchlist
1,956.50-26.50 (-1.34%)
As of 3:58PM BST. Market open.
Full screen
Previous close1,983.00
Open1,988.50
Bid1,956.50 x 0
Ask1,958.00 x 0
Day's range1,937.50 - 1,991.00
52-week range1,554.00 - 2,730.00
Volume262,831
Avg. volume1,238,766
Market cap15.489B
Beta (5Y monthly)0.65
PE ratio (TTM)21.88
EPS (TTM)89.40
Earnings date03 Nov 2020
Forward dividend & yieldN/A (N/A)
Ex-dividend date12 Dec 2019
1y target est2,786.87
  • How Fast Is Too Fast Where Fashion Is Concerned?
    Bloomberg

    How Fast Is Too Fast Where Fashion Is Concerned?

    (Bloomberg Opinion) -- Fast-fashion trailblazer Boohoo Group Plc is being forced to slow down.Retailers including Amazon.com Plc, Next Plc and Asos Plc are dropping Boohoo products after a Sunday Times article alleged unfair working conditions in its U.K. manufacturing chain in Leicester, England. The company came under criticism from social influencers including former reality TV star Vas J Morgan and model Jayde Pierce. Boycottboohoo has been trending on Twitter.After losing 2 billion pounds ($2.5 billion) in market value this week, Boohoo said on Wednesday it’s launching an independent review of its supply chain led by Alison Levitt, a lawyer and former public prosecutor. It also cut ties with two suppliers that infringed on its code of conduct, but said there were inaccuracies in the newspaper report.Even though the investigation will not be completed for some time, the fast-growing company, founded in 2006 to make cheap, catwalk-inspired fashions for young shoppers, is right to take action. Boohoo will bolster its board by appointing two more independent non-executive directors with backgrounds in environmental, social and governance issues. It is essential that it makes quality hires. But it should go further. Co-founder Mahmud Kamani remains executive chairman. If the company is serious about putting itself on a surer footing, it should appoint a strong, independent chairman.One option would be to elevate Brian Small, the former finance director of JD Sports Fashion Plc, who is currently Boohoo’s deputy chairman and senior independent director. Part of Boohoo’s problem is that it has been growing at breakneck speed and hoovering up rival high-street brands. As sales fly, suppliers struggle to keep up, and so they subcontract to other companies, further removed from the retailer. This is what appears to have happened in this case highlighted by the Sunday Times, according to Boohoo’s investigations into the report. Boohoo is now taking steps to crack down on this practice, refusing to place orders with big suppliers unless they disclose subcontractors and allow them to be audited. Boohoo’s new chief executive officer, John Lyttle, has experience tackling this kind of situation. He was formerly chief operating officer at Associated British Foods Plc’s Primark, which has dealt with its own supply chain issues in the past. Even so, there will be costs associated with scrutinizing and overhauling the manufacturing base, and they may ultimately have to be passed onto Boohoo’s customers.The company will invest 10 million pounds to eradicate supply chain malpractice. But it’s not clear what will be found in the independent review. If there are shortcomings, they must be dealt with, at the requisite cost. Boohoo, whose cheap, dressy clothes are often discarded once they’ve appeared in enough selfies, is particularly vulnerable to environmental, and now social, criticism. Sports Direct saw its sales slow after allegations in 2015 about poor conditions in its distribution center in Shirebrook, Derbyshire. Although Boohoo no longer supplies Amazon directly, the U.S. online retailer still holds stock from Boohoo and its associated brands from previous agreements. It will be suspending these products as well as any offered by third-party sellers while Boohoo conducts its investigation.While many young people say they are concerned about the environment and working conditions, it’s not clear how many Boohoo customers will care enough to stop buying its puff-sleeve blouses and very short denim shorts. They may care more about increases in price however, particularly if they have been furloughed because of the coronavirus lockdown or risk losing their jobs altogether in the health crisis’s aftermath.So Boohoo has many challenges ahead. It will have to balance a potentially higher cost base with its low prices, while working to integrate recent acquisitions and manage a growth rate that is still likely to be superior to rivals.That is even more reason why a strong independent chairman must be recruited without delay.(Updates to explain Amazon’s relationship with Boohoo in 11th paragraph.)This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Zara's Latest Fashions Will Be a Post-Covid Hit
    Bloomberg

    Zara's Latest Fashions Will Be a Post-Covid Hit

    (Bloomberg Opinion) -- Don’t be fooled by red replacing black as this season’s color at Zara-owner Inditex SA.The Spanish fast-fashion behemoth reported its first loss since it went public in 2001 after shutting stores during Covid-19 lockdowns worldwide. But nimble retailers will still prosper as economies open back up again, and Inditex is among them. In fact, with a big investment plan to bolster online sales, the company could well emerge even stronger than before the pandemic.The world’s largest fashion retailer is also aggressively overhauling its store network to focus on more muscular flagships. It has already been closing smaller outlets, while opening fewer, larger stores for the past few years. This will accelerate over the next two years, with between 1,000 and 1,200 stores closed, many belonging to Inditex brands other than Zara, such as Pull&Bear, Oysho and Stradivarius. The aim is to transfer their profit contributions to bigger shops or online.There are important costs related to that transformation. The first-quarter net loss of 409 million euros ($465 million) included a 308 million-euro charge for closing stores. And Inditex hasn’t been completely insulated by the retail dislocation. Net sales fell 44% in the three months from Feb. 1 to April 30 due to the coronavirus impact.But Inditex’s business model came into its own during the pandemic. Most garments are ordered within the fashion season, and the company, which gets about two-thirds of its revenue from Europe, has kept its supply chain tight. About 60% of products come from manufacturers in Spain, Morocco, Portugal and Turkey.In early March, the company scaled back purchases when it saw how the pandemic was developing. In early May, it sped them up again to make sure it had enough playsuits and flimsy blouses on hand for June and July. The strategy worked. Inditex actually ended the first quarter with 10% less stock, an impressive feat when other retailers have been saddled with a mountain of unsold spring and summer garments.At the same time, its online business thrived thanks to efforts including the introduction of radio-frequency-identification technology that tracks where every maxi dress and balloon-sleeve blouse is. This enables online orders to be fulfilled from wherever the stock is, be that in warehouses or stores. As my Bloomberg News colleagues have noted, when shops were closed, Inditex was able to redeploy stock to its digital business. Online sales rose 95% year-on-year in April.To capitalize on this trend, Inditex will spend 1 billion euros between now and 2022 to bolster its internet sales, and a further 1.7 billion euros upgrading its stores and further integrating them with its digital platform. Shops will become distribution hubs as well as places that customers can browse and buy products in real life. The aim is for more than 25% of sales to come from digital channels by 2022, up from 14% in 2019.Despite its strengths, Inditex has not been immune from the pre-Covid-19 pressure on the apparel retail sector, with women generally buying fewer clothes and cheaper rivals, such as Boohoo Group Plc and Associated British Foods Plc’s Primark chain, nipping at its heels. That means the strategic blueprint for the next few years is not without risk.Zara is not the cheapest clothes retailer, and in tougher economic times the chain could prove too pricey for some cash-strapped consumers. What’s more, it could be a tricky time for Inditex to put its faith in big flagships if people emerging from lockdown shun larger stores, malls or city centers. And rivals are not giving up. Even fusty British retailer Marks & Spencer Group Plc said it aimed to speed up its supply chain, including using factories closer to its U.K. market.But thanks to its strong balance sheet, Inditex should be able to stay ahead. The company had net cash of 5.8 billion euros at the end of the first quarter. While Covid-19 has upended retail, some things should stay the same, including Inditex’s superstar status.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Long Lines at Ikea Don’t Spell Retail Boom
    Bloomberg

    Long Lines at Ikea Don’t Spell Retail Boom

    (Bloomberg Opinion) -- Anyone who has ever waited at Primark to pay for cheap workout attire or a bargain dress knows just what a challenge it is to keep the snaking line in the right place. With precautions to control the novel coronavirus’s spread, that logistical nightmare will get even worse. Every second cash register will be shut and there’ll be an employee in charge of enforcing the regimented flow of customers — in one way and out another.Social-distancing rules governing shops are just one of the reasons why any honeymoon for retailers in the first days of reopening may be short lived. Many will soon have to confront hard decisions about whether to shut some stores definitively and how to fend off online competition in a world where people may still be hesitant to go out to shop. Recovery will be a long slog, with more pressure on profits than before the Covid-19 outbreak.Non-essential stores in England, which were forced to close in March, will be permitted to open from June 15. Early indications are good. Ikea stores on the outskirts of London and in the West Midlands drew huge queues when the purveyor of flat-packed furniture (classified as essential) reopened earlier this week. In the U.S., where some states have moved quickly to reopen for business, signs have been encouraging — at least until the civil unrest that forced some store closures again.Take TJX Cos., owner of T.J. Maxx, one of the most touchy-feely retail experiences. It might seem that treasure hunting for a designer gem would be less appealing during a pandemic. But in late May the company said that overall, sales were above the year-earlier period in the 1,100 stores that had been open for at least a week. Even Macy’s Inc., which got caught in the department-store maelstrom, said sales were moderately higher than anticipated.It’s a similar picture in Europe. Earlier this week, Primark, owned by Associated British Foods Plc, said that suburban outlets, such as the one in Hilversum in the Netherlands, were comfortably ahead, even though sales in city-center stores in Berlin and Amsterdam were at less than half of what they were a year ago.There will be pent-up demand when stores open in England, too. During lockdown, online shopping has flourished. Initially, demand was for home furnishings and clothing basics, such as underwear and workout gear. But warm weather, along with a slew of special offers, has encouraged more fashion purchases, such as day dresses, over recent weeks. More markdowns, needed to clear out unsold spring and summer stock, could prompt people to splurge when they can get back out to shop again.But a surge at the reopening doesn’t necessarily mean an enduring rebound. The pandemic has had great human and economic costs, with U.K. unemployment expected to spike in the second quarter. Even if their finances have held up, furloughed workers may be reluctant to spend. People make the most drastic changes to their spending when they lose their job or see their friends and family being laid off. Meanwhile, even though economies are gradually reopening, cancelled weddings, parties and overseas holidays will likely mean a lower level of clothing demand for the remainder of this year.Those who do feel brave enough to splash out may get frustrated with long waits to get into stores or check out. That could be bad news for discount retailers that rely on a high number of relatively low-value transactions. Primark could be hardest hit by social-distancing measures at its busiest stores, which accounted for 10-20% of its total sales before the pandemic, parent Associated British Foods said.Store closures during lockdown pushed even more people to shop online, a trend that’s likely to continue. The digital share of non-food sales in the U.K. could increase to 41% over the next 18 months or so, from about 30% at the end of 2019, according to Richard Hyman, the independent retail analyst. Shifting business online comes with additional costs too.All of these forces will make chains think hard about which stores are worth keeping in their networks. In the U.S., Nordstrom Inc. said it would close 16 of its 116 department stores. Expect similar decisions in Europe, especially if the additional costs associated with equipping stores for social distancing can’t be shared with landlords in the form of lower rents.But some companies are poised to make the most of the turmoil. While Primark may have to deal with some tricky in-store logistics, it should still emerge a winner, given its focus on value, along with cheap-chic rivals Hennes & Mauritz AB and Inditex SA’s Zara. Perhaps that’s why Primark, which has shunned online commerce, is actually opening new stores — such as in Manchester’s Trafford Centre — rather than closing any. Online retailers such as Germany’s Zalando SE and Britain’s Asos Plc, as well as companies with big digital businesses, such as Next Plc, should also be well placed.But even for the winners, the next year or so will be testing. The changes roiling the industry in the space of these five months would have taken five years in normal times. That’s a lot for even the most nimble retailers to deal with.  This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.