Associated British Foods, the owner of Primark, has released its full-year results, revealing the effects of the Covid-19 pandemic on the retail giant. Despite showing strength after lockdown with sales of £2 billion since reopening, Primark experienced a 24% decrease in sales and a 60% decline in adjusted operating profit for the year.

Before the pandemic hit, Primark’s sales in the first half of the year were up 4% at constant currency, driven by an increase in retail space and improved like-for-like sales in continental Europe, particularly in Germany. However, the lockdowns and ongoing restrictions had a significant impact on Primark’s sales, resulting in a £2 billion shortfall for the year.

Although store reopenings in July brought strong sales performance for Primark, there were variations across stores due to changes in customer behavior caused by remote working, reduced commuting, and a decline in tourism. Sales at retail parks saw an increase compared to last year, while shopping centers and regional high street stores remained stable. On the other hand, large city center stores heavily reliant on tourism and commuter footfall experienced a significant decline. Before Covid-19, Primark’s 16 largest destination city center stores accounted for 13% of sales, but this dropped to 8% after reopening.

In the UK, sales since reopening were 12% lower on a like-for-like basis, with a 6% decline when excluding the four large city center stores. Despite the challenges, Primark’s value market share in the UK remained consistent with its pre-pandemic share. In Europe, sales were down 17% like-for-like, primarily due to increased public health restrictions in Spain and Portugal. Excluding the 11 European destination city center stores, like-for-like sales were down 14%. In the US, sales were 10% lower on a like-for-like basis, but excluding the Boston city center store, sales remained level with last year. Primark’s US business broke even during the total period while stores were open.

Primark acknowledged the impact of Covid-19 on consumer spending in the clothing, footwear, and accessories market. However, it noted an increase in footfall and transaction numbers since store reopenings, with high initial average basket sizes indicating pent-up demand. Although the outperformance has reduced, the average basket size remains higher than last year.

Primark’s full-year results highlight the negative impact of the pandemic on the company. However, its strong post-lockdown performance and positive customer response demonstrate its resilience and appeal in the value-for-money retail sector. As Primark continues to navigate these challenging times, it remains focused on adapting to changing customer needs and providing affordable fashion options.

Useful Links:
1. BBC – Primark owner ABF’s profit halves in sent-off fashion
2. The Guardian – Pandemic takes £2bn toll on Primark but German sales rise