Primark upbeat as trading recovers in recent weeks
Primark had some good news on Thursday, saying that since its last trading update a month ago, its stores have reopened more quickly than expected, particularly in Ireland, and trading is on an upswing.
On 15 June it reopened 179 stores, representing nearly half of its estate, in four markets, along with the debut of its brand-new store in the UK’s Trafford Centre in Manchester. It means 367 stores have reopened with only eight left (seven in Scotland and one in the US) and those few are expected to follow “in the near future”.
So how has it fared since it reopened? Trading in the stores “has in aggregate been reassuring and encouraging,” it said. “Over such a short period it will have been influenced by a number of short- and medium-term factors. Consumer demand has been strong for children's, leisure and nightwear, along with summer products such as shorts and T-shirts, and unsurprisingly weak for formal menswear and travel-related accessories”.
Most of its regional stores are performing well, especially in retail parks. But its stores in the centre of big cities “are suffering from the current absence of tourism and much lower commuter footfall”. Sales have also been held back to some extent by “a number of operating restrictions, which vary by country but continue to evolve”.
Since the reopening of the first stores on 4 May, cumulative sales for the seven-week period to 20 June were £322 million — that’s 12% lower than last year on a like-for-like basis, which looks like a good result in the circumstances. And trading seems to be improving too. Sales in the week ended 20 June, with over 90% of its selling space reopened, were £133 million and trading in England and Ireland was actually higher year-on-year.
Yet such good news can’t hide the fact that with 100% of the the firm’s stores closing over a 12-day period up to 22 March and not opening until May at the earliest, it faced a loss of sales of some £650 million per month. Given that the company doesn’t trade online, there was no way to claw any of that back. Plus it had a cash outlay of around £100 million a month during the lockdown.
The current healthy trading will help to make up for some of the costs incurred during the lockdown, as will deals struck with landlords. On Thursday the retailer said it has “made progress with landlords to secure an equitable outcome for the rent payments for the period when we were not trading". And it added that “the discussions have been on a bilateral basis with each landlord as we have sought to share a fair proportion of the burden incurred during that time”. Specifically, UK rent payments due for the six-month period of March to September “have mostly been made, with the remainder payable shortly, with the amount and frequency by mutual agreement”.
For now, the company is looking to the future and said that with its stores trading, it has placed orders worth over £800 million for the AW20 season and, with further orders to be placed shortly, “we expect the total for the coming season to exceed £1 billion”.
Its store opening programme has been understandably delayed by the lockdowns but in this quarter it has been able to open five of the stores planned: Mons in Belgium; Gropius Passagen in Berlin; Trafford Centre, as mentioned; Lens in France; and, earlier this week, a major new store in Plaza de Cataluña in Barcelona, Spain. This has added 242,000 sq ft of retail selling space.
For the rest of this financial year, it expects to add five more new stores in the Belle Epine and Plaisir shopping centres in Paris; in the American Dream shopping centre in New Jersey, and in Sawgrass Mills, Florida; and its first store in Poland, in Warsaw. The new store openings in the US will increase its portfolio there to 11.
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