The group trading update scheduled for 2 July will include Primark sales which will be informed by trading in stores soon to re-open and an additional four weeks of data.
Primark stores
As a result of the rapid spread of Covid-19 in our markets, all Primark stores were closed over a 12-day period from 11 March. As previously advised, this resulted in a loss of sales of approximately
We took a number of actions in Primark to substantially reduce the cash outflow resulting from this loss of sales. These mainly comprised cancellation of future orders for goods where the handover date from the supplier was after 17 April and a range of measures to reduce operating overhead while the stores are closed. The most significant contributor to the reduction in overheads has been access to government employment retention schemes across
As European governments have begun to ease restrictions on clothing retailing we have been able to re-open stores. Safety has been our highest priority in our detailed preparations to welcome our customers and employees back to stores. We are following government safety advice in all markets. Importantly, we will apply the valuable experience gained from more than 100 stores which are already open as we open the remainder of our estate, including stores across the
The table below sets out those Primark stores that have already re-opened, those with a confirmed re-opening date and expected dates for the remaining stores where we still await confirmation.
As at today, Primark is trading in 112 stores which represent 34 percent of our total selling space. Primark is now working to re-open all its stores in
By 15 June, we will also have opened three new stores which were originally planned for opening in our financial third quarter: Mons in
See details at: https://www.abf.co.uk/media/news/2020/covid-19-update
At the start of the re-opening of stores, Primark had
Our sourcing team has recognised the impact that Covid-19 and the subsequent reduction in orders has had on the garment supply industry and its employees. The team has maintained frequent and direct contact with each of our suppliers. We recently established a fund to ensure that the labour element of certain product finished and in production for Primark in the most vulnerable countries was paid to those workers. To date, we have made initial payments, totalling some
The excess stock on hand mainly comprises everyday continuity, non-fashion and non-seasonal, ranges and some excess Spring Summer stock. The nature of the continuity stock will allow it to be sold in the normal course of business, albeit at a later date and without the need for special discounting beyond our normal practices. The buying team has conducted a detailed review of the Spring Summer stock on hand and has earmarked certain products to be held in storage for sale in Spring Summer 2021.
Trading in our re-opened stores has been both reassuring and encouraging, with customer queues outside most stores and, once in store, spending on larger basket sizes. However, the trading results since re-opening were delivered over a very short period, will have been influenced by a number of specific factors, and may not be indicative of a long term pattern. Cumulative sales since re-opening, on a like-for-like basis, were down on the same period last year in aggregate. For a number of stores, sales were ahead of last year. A good number of our regional stores are performing well and only four stores had initial sales below 50 percent of last year. This included Damrak in the centre of
Consumer demand has been strong for children's, leisure and night wear, along with summer products such as shorts and t-shirts, reflecting good weather in markets where we are trading.
Primark stores pre Covid-19 had a wide range of aggregate sales densities, with significant variations in each store during a day and between days of the week. Compliance with the requirement to ensure social distancing in our stores has put an effective maximum on the hourly footfall for every store. For those stores with low sales densities, the social distancing maximum will not restrict the sales densities previously achieved, even at peak times. For those stores with sales densities around the average, this maximum footfall will restrict sales densities at peak trading times, but we expect some change in consumer behaviour to help mitigate this effect. However, as long as social distancing is required, we expect it to restrict the capacity of our busiest stores from achieving their aggregate pre Covid-19 sales densities. The extent of that effect will depend on the social distancing rules adopted in each country and finding safe operational solutions to improve customer flow, particularly at checkout which has already been identified as a bottleneck. Our initial view is that the implementation of social distancing could only affect sales to some extent in the higher density stores, which represented some 10-20 percent of pre Covid-19 total Primark sales.
Food businesses
We have maintained production at all of our food business facilities, despite the operational challenges arising from Covid-19. This has ensured the continued supply of essential products for the food, animal feed and pharmaceutical supply chains.
Grocery operating profit will be ahead of our previous expectations with stronger sales of branded products sold through the retail channel, more than offsetting weaker sales in food service. However, we now expect a lower profit at AB Sugar following further disappointing performance at Illovo.
The aggregate operating profit for the group's food businesses is expected to be in line with previous guidance.
Group cashflow forecast
Our review at the half year of the cash flow forecast for the coming year evidenced the group's strong cash liquidity, with considerable financial headroom. The cash flow forecast at that time was based on the conservative assumption that all Primark stores would not re-open until September. The current schedule advances the re-openings by some months and should deliver a much improved cash flow from trading in the second half of this financial year.
It remains too early to resume earnings guidance for the remainder of the current financial year.
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Jos Bienemen
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