Primark warns of a £ 1 billion sale amid store closures

Value seller Primark warned of the impact of a retail loss of more than £ 1 billion ($ 1.36 billion) due to the pandemic blockade as it revealed revenue was 30% less than last year.

In a commercial update released today (Jan.14), which ran from 16 weeks through January 2, Associated British Foods (ABF) retail division said it currently has 305 stores closed, accounting for 76% of retail space.

Primark said it had implemented operational plans to try to deal with the consequences of the shutdown and was able to mitigate some of the commercial impact by cutting overall costs by 25%.

However, the retailer estimates the loss in sales during the 16-week closing period at £ 540 million. Assuming that all currently closed stores remain closed during the fiscal quarter – 27 February – Primark expects a sales loss of £ 1.05 billion, higher than its previous estimate of £ 650 million.

Store closures have a special effect on a valuable clothing retailer since they don’t operate a transactional site.

“The impact of store closures on Primark’s results is significant,” ABF said. “We now expect Primark’s full-year sales and adjusted operating profit to be slightly lower than last year.”

The adjusted operating profit for the first half of the year is expected to break evenly, compared to 441 million pounds for the same period last year.

While stores were open, Primark said the business was robust, with sales down 14% compared to last year. The discount level was also much lower than in the previous year. Primark said it will keep around £ 200m in fall / winter stock later this year, and all orders placed with suppliers will be fulfilled.

Under the scenario, the property will remain closed until the end of March, and Primark estimates an additional sales loss of around 0.8 billion pounds over the three-month period, thus reducing the profit contribution by about 0.3 billion pounds.

Despite the epidemic that has delayed some store openings, the retailer still hopes to add 0.7 square meters of additional sales space this fiscal year, with 15 new stores: five in Spain, three in the United States, two in Italy, and one in each kingdom. . United, France and Holland, another store in Poland and the first store in Prague. New lease agreements have also been signed in New York, six in Italy, three in France, Katowice in Poland and Brno in the Czech Republic.

GlobalData retail analyst Gemma Boothroyd believes Primark’s finger on the wrist to offer an attractive range of products, coupled with the decision to move £ 200m in inventory over the next year, has allowed the retailer to slash discounts, cushioning the impact of lower sales volumes.

“However, with a bleak period with no sales in the UK, it is prudent for Primark to focus on geographic expansion as it plans to open 15 stores in eight countries in fiscal year 2020/21, including the first in the Czech Republic,” he adds.

With the third ban currently in effect in England, Primark fans have turned to Twitter asking the seller to consider an online offer. Nevertheless, Primark is determined to resist, and hopes to be able to keep prices low. It will undoubtedly be an important task in managing logistics and warehouse space. Needed for large inventories; other high-value brands like Matalan and George have managed to keep prices low while dealing with digital operations, proving that the rising preference for online shopping is not just an epidemic, but with losses due to temporary store closures that could reach $ 1.05 billion. Sterling in the first half, no time to waste. Primark. By maintaining a loyal customer base while stores are overly closed, if the retailer does not digitize its offerings soon, it will continue to lose out to competitors online. “

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