Primark hurt by Covid in latest year but results show business strength
Just a day after Primark announced that the latest round of lockdowns would lead to revenue losses of £375 million, its owner Associated British Foods announced its full-year results and showed how big an impact the spring/summer round of lockdowns had. But it also showed how strong this business is overall.
In the 12 months to September 12, the company said it saw a “robust performance in retail” but that didn't stop it reporting total ABF group revenue down 12% to £13.9 billion. And adjusted operating profit fell 28% to £1.02 billion. Statutory pre-tax profit fell 40% to £686 million.
CEO George Weston said that Primark was strong post-lockdown “receiving an overwhelmingly positive response. Sales since reopening to the year-end of £2 billion demonstrate the relevance and appeal of our value-for-money offering”.
But the division’s sales for the year still fell 24% to £5.89 billion. And its adjusted operating profit was down 60% to £362 million. Its 'return on average capital employed' also fell to 5.6% from 15.2% a year earlier.
On the plus side, sales in the first half of the year before the pandemic really hit were up 4% at constant currency, driven by the increase in retail selling space and supported by a substantial improvement in like-for-like sales in continental Europe. A key driver was a notable improvement in Germany.
All stores reopened by mid-July and since reopening it has “traded strongly with a low level of markdown”.
But it estimates that total sales for the year were £2 billion lower as a result of Covid-19 and that impact will still have been felt once its shops reopened.
It said the post-reopening sales performance has been “reassuring and encouraging” but by store, the performance has varied, “reflecting the current circumstances of our customers including increased home working, less commuting and much less tourism”.
Sales at its stores in retail parks have been higher than a year ago. Shopping centre and regional high street stores have been broadly in line with last year and large destination city centre stores, which are heavily reliant on tourism and commuters, have seen a “significant decline” in footfall. Its 16 largest destination city centre stores contributed 13% of total sales pre-Covid and 8% of sales after reopening.
In the UK, sales since reopening to the year-end were 12% lower on a like-for-like basis and if the four large UK destination city centre stores are excluded, the decline was 6%. UK market data for consumer spend on clothing, footwear and accessories in all channels shows that in the 12 weeks to 20 September, its value market share was in line with its pre-pandemic share of a year ago.
Sales in Europe in the reopening period were 17% lower like-for-like, “reflecting increased public health restrictions, particularly in Spain and Portugal”. If it excludes its 11 European destination city centre stores, like-for-like sales were down 14%.
And sales in the US since reopening to the year-end were 10% lower like-for-like. However, excluding its Boston destination city centre store, they were level with last year. Importantly, its US business was at break-even for the total period while the stores were open.
The company added that total customer spend on clothing, footwear and accessories in all sales channels in its markets has been hurt by Covid-19. “It has been recovering from a low point in April and the rate accelerated with the reopening of stores,” it said. “Since reopening we have seen increasing numbers of transactions driven by footfall. The average basket size was initially significantly higher than last year, reflecting some pent-up demand, and while this outperformance has reduced it remains higher than a year ago”.
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