Associated British Foods (ABF), the owner of Primark, said the closure of the budget fashion chain’s stores had cost the company £540m in lost sales so far, warning the total could reach £1bn due to ongoing restrictions.
ABF said the loss of sales due to temporary store closures will cost the firm £1.05bn if they continue to the end of February.
The forecast is significantly worse than previous estimates of a £650m revenue hit. The company has been forced to close 305 stores, representing 76 per cent of Primark’s retail selling space
Primark sales were 30 per cent down in the 16 weeks to 2 January due to the impact of lockdown restrictions in the UK and Europe.
Shares in ABF were down 0.3 per cent this morning on the results.
While stores were open, trading was down just 14 per cent on the previous year, with retail park branches recording a year-on-year sales increase.
However Primark sites across shopping centres, regional high streets and city centres suffered falling sales due to a significant drop in footfall.
A stay-at-home Christmas
ABF said sales were strong across the stores that remained open during the festive season, resulting in all Christmas and gifting lines selling out and high demand for “stay at home” categories such as nightwear and loungewear.
The level of markdown was “substantially lower” than last year,” it said.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “Primark used to be the jewel in the crown for Associated British Foods, but it’s now more like a thorn in its side with the lockdown closures now expected to create a gaping hole in revenues.
“While the grocer Tesco stacked up an extra £1bn in sales due to a surge in demand, by contrast, Primark now expects revenues to fall by £1bn pounds.
“That’s significantly worse than its forecasts at the start of the year when it predicted sales would fall by £650m.”
Royal Bank of Canada analyst Richard Chamberlain said Primark is expected to drive further share gains after stores reopen due it its “compelling price points”.
“Although it lacks a transactional digital offer, we think its prices act as a barrier to entry versus online competitors and we see an opportunity for it to accelerate US expansion,” Chamberlain said in a note to investors this morning.
“That being said, Primark remains impacted in the short term, whilst stores are shut, by its lack of online offset.”