02 July 2020

Primark owner hails ‘encouraging’ early sales after lockdown

02 July 2020

Primark owner Associated British Foods (ABF) has said sales at the high street retailer have been “encouraging” after reopening sites, despite predicting a major hit to profits.

ABF said the chain has been boosted by strong sales of children’s clothes and leisurewear but that sales for the past quarter plummeted 75% to £582 million as a result of the virus pandemic.

The consumer group said total sales across its divisions had fallen by 39% to £2.6 billion for the quarter to June 20, compared with the same period last year.

It said significantly lower sales at Primark, which has no online operations, were partly offset by growth in its grocery and ingredients arms.

ABF said only eight of its 375 Primark stores have not yet reopened, while it has reported “reassuring and encouraging” trade from stores which have welcomed customers again.

Customer demand has also been strong for summer clothing such as shorts and T-shirts, while sales of formal menswear and travel-related accessories have been “unsurprisingly weak”, it said.

In a statement, the company added: “Most of our regional stores are performing well, especially in retail parks.

“Our stores in the centre of big cities are suffering from the current absence of tourism and much lower commuter footfall.”

It said sales in the first week of reopening in England and Wales were “ahead of the same week last year” after raking in £133 million from customers.

Finance chief John Bason told the PA news agency that Primark stores in regional cities across the UK have performed particularly strongly.

“We’ve seen a fabulous response right across the country since reopening day. It’s clear people have missed us,” he said.

Coronavirus – Mon Jun 29, 2020 (PA Wire)

“The response has been particularly strong regionally, outside of the traditional big city centres, where footfall is still down.

“It’s great to see customers in the stores again but it’s also great that tens of thousands of staff whose jobs stopped in March are back there too.”

ABF also warned that the Covid-10 crisis could knock more than £600 million off Primark’s operating profit for the year.

However, it said it is expects “strong progress” in adjusted operating profits for its grocery, ingredients, agriculture and sugar arms.

ABF said its third-quarter grocery revenues were 9% ahead of last year, due to higher volumes as customers bought more store-cupboard products.

Strong tea sales boosted its Twinings Ovaltine division, while Jordans and Dorset cereals, Ryvita, Silver Spoon, Pataks and Blue Dragon were boosted by people eating more meals at home.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “There’s a lot to like in these numbers – and it’s the first time we’ve been able to say that in a while.

“Yes, Primark sales are down dramatically in the third quarter, but trading in the first few weeks of June looks very promising and, with almost all stores now open, that provides a strong base for recovery.

“Meanwhile, the group’s food-focused operations have not only benefited from consumers being stuck at home but have also delivered margin improvements – doubly good news for profits.”

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