In a recent trading update, Primark, the value retailer, announced that its sales are expected to decrease by approximately £1.1 billion due to the impact of lockdowns and restrictions in the 27 weeks leading up to the end of February. The parent company, Associated British Foods, delivered the disappointing news ahead of its interim results in April. However, Primark did highlight that the demand and trading were encouraging during the periods when stores were open over the past six months.

Despite the challenges faced during temporary store closures, Primark anticipates sales in the first half to reach around £2.2 billion, with adjusted operating profit expected to be slightly above break-even. Nevertheless, this figure is significantly lower than the £441 million generated in the previous year, and sales are also expected to be below the £3.7 billion achieved during the same period a year ago.

The company is eagerly awaiting the reopening of its Primark stores and has potential reopening dates for an additional 233 stores, in addition to the current 77 stores that are already open. By April 26, it expects approximately 83% of its retail selling space to be trading again. Primark plans to sell its Spring/Summer 2021 collection at that point and has already started placing orders for the Autumn/Winter 2021 season, indicating its confidence that the latest lockdowns will be the last. The company also expects the period following reopening to generate a significant amount of cash.

Despite the challenging retail environment, Primark’s previous experience showed that when stores were open, trading performance remained strong, with sales decreasing by only 15% on a like-for-like basis compared to the previous year. This achievement is notable considering the lower discretionary spending, restricted opening hours, and reduced footfall. However, the performance varied across its stores, with retail park locations experiencing higher like-for-like sales compared to shopping center and regional high street stores. Large city center stores, heavily reliant on tourism and commuters, continued to experience a significant decline in footfall. Excluding the 16 major city center stores, trading was only down 11% on a like-for-like basis.

Primark’s business in the US remained strong, with newly opened stores performing well. The company reported that all Christmas and gifting lines had sold out, and ‘stay at home’ product categories, such as nightwear and loungewear, experienced strong demand. Despite global closures, Primark managed to expand its store network with the opening of six new units in France, Spain, the US, and Italy. Looking ahead, Primark plans to open an additional 15 new stores during the full financial year, with a focus on Spain, the US, Italy, the UK, France, the Netherlands, Poland, and Czechia.

One crucial factor for the company’s success is its ability to trade, especially as it does not have an online store. Primark has already reopened its stores in Austria, Poland, and Slovenia in recent weeks, and the trading performance has been very strong, with sales exceeding last year’s figures on a like-for-like basis. The next reopening plans include Spain, Germany, and the Netherlands next month, followed by England in mid-April and Scotland later in the month. However, there are currently no reopening dates for the remaining 20% of its stores (or 17% of floor space) located in the rest of Europe.

Useful links:
BBC – Primark expects £1.1bn hit to lockdown sales
Reuters – Primark’s sales to slump by £1 billion as stores remain shut