AT 71, Arthur Ryan seems an unlikely champion of fashion for the under-35s.
But this reserved Irishman has built Primark into one of Britain’s fastest
growing and most successful retailers.
This week the company, which is wholly owned by Associated British Foods, is
expected to unveil bumper first-half results. However, questions are being
asked about how long its success can continue and what will happen when Ryan
steps down as chairman and managing director.
At present Ryan remains firmly at the helm. He has the stamina of an ox and
was spotted out partying until 3am after Primark’s Oxford Street debut.
Earlier the store had been mobbed by 3,000 shoppers so eager to get their
hands on the goods that they had to be restrained by police. The store was a
milestone in Primark history - but true to the family style of the business,
it was opened by Ryan’s wife, cabaret singer Alma Carroll.
Ryan is said to be a workaholic and an inspirational leader. “He works
incredibly hard and he demands a lot,” said a former employee. “He would
never ask you to do anything that he wouldn’t be prepared to do himself, but
he wouldn’t pull any punches if you didn’t perform.”
Another employee said: “The company is led with such passion that it is hard
not to be inspired by Ryan.” Valued employees have been given flowers at
Christmas, or books or short breaks to reward good performance.
Despite its huge success in Britain, the company retains its headquarters in
Dublin. Ryan lives in Lansdowne Road - known as millionaires’ row - but
frequently jets over to Britain to check out Primark’s stores.
Friends say that, like his friend Sir Philip Green, he eats, sleeps and dreams
about his business. “He is an old-style merchant who spends a lot of time on
store visits. He walks the high street more than anyone else I know,” said
one former insider.
“He used to amaze us with his eye for detail. He would walk into a meeting and
look at new products and say, ‘what about those cuffs on those new shirts at
Oasis, maybe we should look at doing that’.”
Ryan’s emphasis has been on trading lots of stock and being the cheapest on
the high street as part of a drive to build market share.
“His view would almost be counter-intuitive,” said a former employee. “He
would look at a product line that was selling well at £5 and cut the price
to £3 because it would sell even more.”
Primark has been a dream business for its owner, Galen Weston’s Associated
British Foods (ABF). Cash generated by the lower-margin food business has
been ploughed into the higher-margin fashion arm. Ryan has no equity stake
in the business and is a paid employee, according to ABF. Because he is not
a board director his pay is not disclosed, but industry executives say the
Primark managers earn more than any of the ABF board members.
Primark was set up by ABF in Ireland in 1969, trading as Penneys, but it took
off in Britain in the late 1990s after the sale of Quinnsworth and Stewarts
to Tesco. Ryan persuaded ABF that one of the biggest growth areas in retail
would be value fashion for young people.
The company still sells clothes at unbelievably low prices. It sources mainly
from Asia, dealing direct with manufacturers and delivering its
extraordinary prices by ordering in huge volumes. New products are in
Primark stores every few weeks.
The company embarked on one of the biggest expansion programmes by a British
retailer with the purchase of a huge portfolio of Littlewoods stores in July
2005. The deal added more than 40% to its existing floor space and gave it a
raft of big, glitzy stores.
A few years ago it was a shop that nobody admitted going to. Growing demand
for affordable fashion and a niche following among a smattering of celebrity
shoppers has helped Primark, nicknamed Pradamark, become cool. When Wayne
Rooney’s fiancee Coleen McLoughlin admitted wearing pyjamas from Primark,
sales soared.
But it doesn’t pay for celebrity endorsements, doesn’t advertise, doesn’t hold
sales.
“We mark down slow moving items, but we don’t hold end-of-season sales.
Everything you see is a ‘wow’ price,” said ABF finance director John Bason.
Primark prides itself on being the cheapest place for clothes on the high
street - beating even giant Tesco. “£1 in Primark, would be £1.10 in Tesco
and maybe £1.60 in Marks & Spencer,” said one retail analyst.
Most of the stores are owned freehold, so with no rent payments, Primark can
afford to sell goods more cheaply. Analysts at Citigroup estimate that the
group’s freehold and long leasehold estate alone is worth £730m - 70% more
than the estimated net book value, based on a rental yield of 5.5%.
Primark could spin off some of its property into a tax-efficient real estate
investment trust, but the company likes the benefits of being its own master
and believes sale and leasebacks and disposals offer only a one-off
short-term benefit.
A decade ago, Primark’s contribution to ABF’s profits amounted to little more
than a rounding error. ABF, founded in 1935 as a group of bakeries, was
overwhelmingly a food group, with flour milling, bread baking, biscuits,
sugar refining and a host of other food businesses. In 1996, it had sales of
£5.7 billion. Primark accounted for just 4.2% of turnover, and most of that
was outside Britain. Its contribution to profits was only £13m.
In the current year it is likely to clock up sales of £2.7 billion, and
account for well over a third of ABF’s total operating profits.
Primark has 166 stores, most of them in the UK and Ireland and two in Spain.
The Spanish stores are thriving and Morgan Stanley, the investment bank,
estimates there could be scope for 100 stores in Spain and more in other
mainland European countries. Analysts also believe there is still plenty of
potential for growth in Britain.
The City regularly speculates that ABF will demerge Primark and spin it off
into a separate business, but it has always resisted such moves, insisting
that Primark thrives because of its relationship with ABF, not in spite of
it. “ABF brings capital and has given Primark a fantastic stability so it
can just concentrate on being a retailer,” said Bason.
But the industry is nervous about what will happen when Ryan steps down. “He’s
a one-off. You could never plan to replace him,” said one retail source.
The job will be one of the most hotly contested in retailing, but ABF insists
that Ryan is firmly at the helm. He is surrounded by three other members of
the so-called “gang of four” - a tight-knit group of mainly Irish colleagues
who have built the business with him. Key among these is Seamus Halford, who
along with Ryan was poached by Wes-ton from rival Dunnes stores in the
1960s. The other two players are Breege O’Donoghue, the human-resources
boss, and Patrick Prior, the finance director.
Halford is regarded as the most likely internal successor but industry experts
say that in recent years Primark has recruited from other blue-chip
retailers. While it would go against the Primark culture to install an
external chief executive, ABF may be forced to look outside for a long-term
solution. If that happens there will be question marks over how long the
success story continues. “It is by no means a one-man band, but his stamp is
on everything that Primark does,” said Richard Hyman from Verdict Research.
Looking ahead, Primark will need to think hard about its business model. As
one analyst put it, when you are already the cheapest where do you go from
here?
“There must be a question about how Primark develops its range up the price
spectrum without sending out mixed messages to its customers.” Another said:
“There is no doubt the company will carry on growing share, but it will have to
run faster to get there.”
