Primark says UK, Europe sales dented by coronavirus, but supply chain is fine

By

Sandra Halliday

Published
Mar 16, 2020

Primark’s owner Associated British Foods updated on the situation around the coronavirus on Monday and said that stores accounting for 30% of its sales are now closed due to developments in Western Europe.

“Over the weekend in France, Spain and Austria, stores accounting for 20% of Primark's selling space are now closed until the respective governments permit them to re-open,” it said. “These stores currently generate 30% of Primark's sales.”

As of Monday, it had expected sales of £190m from these stores over the next four weeks.

Ads

And even though some countries haven’t yet seen mass store closures, the remainder of Primark's estate, including the UK that represents 41% of sales, "has seen like-for-like sales declines over the last two weeks and these have accelerated over the past few days as a result of reduced footfall”.

On the upside, the company also said that the first half of its trading year (the six months to February 24,) should actually see adjusted operating profit ahead of its previous expectations due to higher margins for Primark.

And while the firm is “closely monitoring the current and potential effects of the outbreak on operations,” it said the risk to supply of goods from its suppliers in China hasn’t materialised. Since it last updated the market, “the situation in China has improved, with most factories supplying Primark having re-opened. As a result, supply shortages from that country are now expected to be minimal”.

The company said it’s managing its business “appropriately” but doesn’t expect to “significantly mitigate the effect of the contribution lost" from the sales that should be coming via its shuttered shops.

Of course, Primark is one of very few retailers these days not to sell its products online at all and so can't make up for any sales lost through physical stores.

Given the effect of COVID-19 on Primark's sales, it added that “it is too early to provide earnings guidance for the remainder of the current financial year”.