Primark warns of £1bn hit from lockdown shop closures

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A Primark store

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Primark owner Associated British Foods has warned its fashion chain could lose more than £1bn-worth of sales if the current store closures under lockdown continue until the end of February.

At the moment, 305 of Primark’s 389 global stores are closed – including all 190 of its UK stores.

However, unlike rivals such as Asos the retailer has no online operation to fall back on.

Its sales fell 30% to £2bn in the 16 weeks to 2 January.

Since March last year, non-essential shops in the UK and overseas have faced strict curbs and prolonged closures.

In England all are currently shut and not expected to reopen until at least the middle of February.

In a statement Primark said: “Making the assumption that all of the stores currently closed remain closed until the financial half year, at 27 February 2021, the loss of sales caused by temporary store closures would reach some £1.05bn.

“This is up from our previous estimate, based on announced closure dates, of £650m.”

The retailer said it would partially mitigate this by cutting its costs, but did not say if that would mean job losses.

“On this basis, we expect the adjusted operating profit for Primark in the first half to be broadly break-even, which would compare to an adjusted operating profit of £441m for the same period in the last financial year,” it added.

‘Sales switched off’

Richard Lim of analysts Retail Economics said Primark’s inability to switch to online trading during periods of lockdown had been “laid bare” in its latest sales figures.

“As the lights went out across their store estate, sales were effectively switched off too while the competition pivoted to online platforms,” he said. “The longer these disruptions continue, the larger the price they will have to pay.”

Associated British Foods also owns food and agriculture businesses. Sales across the group were down 13% in the 16 weeks to 2 January at £4.8bn.

In other retail news:

  • Tesco reported record sales for the Christmas period after customers looked to “treat themselves” amid tough Covid restrictions, with UK like-for-like sales were up 8.1% in the six weeks to 9 January. However, it also said it had seen some disruption to food supplies in Northern Ireland since trading arrangements with the EU changed on 1 January.
  • Halfords said it had seen its “best ever Christmas week” during festive trading. Sales of bikes, e-bikes and e-scooters did well in particular, with a 35.4% uplift in like-for-like sales seen in the 13 weeks to 1 January from a year ago. Although motoring sales fell as a result of lockdowns, sales across the group were up 11.5%. The chain has been allowed to stay open during lockdowns as it is classified as an essential retailer.
  • Online fashion retailer Boohoo said it saw “strong” sales growth of 40% in the last four months of 2020, with revenues hitting £660.8m over the period. The company has also raised its revenue growth forecast for the year to 28 February to 36-38%, up from its previous guidance of 28-32%.
  • Card Factory has warned that it might breach agreements with its banks this month due to the “significant impact” current lockdown measures are having on its trading. The greeting card retailer expects to report a loss of £10m for the year to 31 January, compared with a profit of £65.2m a year earlier. Card Factory is talking to its banks over its covenants and said its existing bank facilities will be sufficient if the latest lockdown does not extend beyond 30 April.