Primark warns lockdown will cost it £1bn in lost sales

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·2-min read
VALENCIA, SPAIN - 2021/01/08: People wearing face masks walk past a Primark store during the winter sales. In the last weeks of Christmas, the cases of Covid19 in Valencia have increased, this has caused the winter sales to begin accompanied by new anti-Covid measures that also affect the hospitality sector. Until January 31, bars and restaurants will close at 5pm and a maximum of four people will be allowed per table. The capacity is reduced to 30% in shops. (Photo by Xisco Navarro/SOPA Images/LightRocket via Getty Images)
ABF said Primark was likely to break even this financial year, compared to a profit of £441m last year. Photo: Xisco Navarro/SOPA Images/LightRocket via Getty

Primark is likely to lose at least £1bn ($1.4bn) in sales due to COVID-19 lockdowns, its owner has warned.

Associated British Foods (ABF.L), which owns Primark, said on Thursday that if lockdown restrictions persist until 27 February — the end of its financial year — it will likely see sales down by £1.05bn. If stores remain closed until March, a further £800m could disappear.

The estimate is up from a £650m loss ABF warned of on New Year’s Eve. ABF said the lost sales would be partially mitigated by cost saving measures at closed stores, which have reduced operating costs by 25%.

ABF said Primark was likely to break even this financial year, compared to a profit of £441m last year.

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“The impact of store closures on Primark's performance is significant,” the company warned.

Primark has been hit particularly hard by lockdowns as the bargain clothing retail has no online shopping alternative. All of Primark’s 190 UK shops are currently closed and 305 locations around the world are shut, representing 75% of its retail space.

“Primark used to be the jewel in the crown for Associated British Foods, but it’s now more like a thorn in its side,” said Susannah Streeter, a senior investment and markets analyst at stockbroker Hargreaves Lansdown.

“While its fast fashion rival ASOS has cleaned up online, and Boohoo has today reported a 40% surge in sales, Primark can’t offset store closures with digital sales because it doesn’t have an e-commerce arm to fall back on.”

Primark sales were down 30% to £2bn in the 16 weeks to 2 January. That shrunk ABF’s overall revenue in the period by 13% to £4.8bn, despite growth in every other division.

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ABF said Primark had already lost an estimated £540m in sales over the festive period due to restrictions. £200m of unsold autumn and winter stock will also be “hibernated” until next year.

The new Brexit free trade agreement has also impacted the business, although the company didn’t spell out how. ABF said there was “no material disruption to our supply chains.”

Elsewhere in the business, ABF said it was seeing a boost from higher sugar prices and strong sales of grocery brands like Twinings and Ovaltine.

ABF shares sold of sharply at the open before quickly recovering. Photo: Yahoo Finance UK
ABF shares sold of sharply at the open before quickly recovering. Photo: Yahoo Finance UK

Shares slipped over 1.5% in early trade in London before recovering slightly to trade down just half a percent.

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