Latest lockdowns make £1.1bn dent in Primark sales
Primark will have lost around £1.1 billion worth of sales due to lockdowns and other restrictions in the 27 weeks up to the end of this month, the value retailer said on Thursday.
Its parent company, Associated British Foods, issued a trading update ahead of its interim results that are due in April and shared the bad news on sales.
But it also said that when stores were open in the past six months, “demand was strong and trading was encouraging, given the circumstances”.
Also on the upside, it still expects Primark sales in the first half to be around £2.2 billion and its adjusted operating profit to be “marginally above break-even”. Of course, that will be much lower than the £441 million it made in the previous year. Its sales a year earlier were £3.7 billion.
The company said, with some understatement, that it’s “looking forward to the reopening of the Primark estate”. As of today, it has likely reopening dates for 233 stores in addition to the 77 stores already open, so that 83% of its retail selling space should be trading by 26 April.
It will be selling SS21 at that point and added it has been placing orders for merchandise with a long lead time for the AW21 season, so it’s clearly expecting the latest lockdowns to be the last. It also expects the period after reopening “to be highly cash generative”.
That optimism seems to be supported by its experience so far. As mentioned earlier, when stores were open trading continued to be strong, with sales down only 15% on a like-for-like basis compared to last year. Taken in the context of lower category spend, restricted opening hours and lower footfall, that’s an impressive number.
It said that performance varied by store reflecting the prevailing circumstances of its customers, including home working, less commuting and very little tourism.
Like-for-like sales at its stores in retail parks were higher than a year ago, shopping centre and regional high street stores were lower than last year, and large destination city centre stores that are heavily reliant on tourism and commuters “continue to see a significant decline in footfall”. Excluding its 16 major city centre stores, trading was down only 11% on a like-for-like basis.
Its business in the US has continued to perform well, with “particularly strong trading” at recently opened stores (American Dream, New Jersey and Sawgrass Mills, Florida). It said that all Christmas and gifting lines were sold out there and the performance of 'stay at home’ product categories was strong, especially nightwear and loungewear. The level of markdown was also “substantially lower” year-on-year.
And despite the closures globally, it managed to add to its store numbers in the period with six new units in France, Spain, the US and Italy. “The very positive customer reaction to these store openings, both in the US and in Europe, was striking,” it said.
And it plans to open 15 new stores for the full financial year, adding more in Spain, the US, Italy, the UK, France, the Netherlands, Poland and Czechia. It also has a longer-term pipeline of new stores in the US, Spain, Italy, France and Poland.
But, of course, what’s important is that its stores are able to trade, especially as the retailer has no webstore. Over the last few weeks, its stores in Austria, Poland and Slovenia have already reopened and “trading has been very strong”. Sales in these stores were ahead of last year on a like-for-like basis. “Customer demand was particularly strong for children's wear, nightwear and loungewear,” it said.
It will reopen in Spain, Germany the the Netherlands next month, and England in the UK in mid-April and Scotland later in the month. But it has no reopening dates yet for the 20% of its stores (or 17% by floorspace) located in the rest of Europe.
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