Coronavirus lockdowns have cost Primark £800m, with the clothing retailer expecting profits to tumble by two-thirds this financial year.
Revenues at the retailer fell by 75% between 1 March and 20 June, to £582m, Primark’s owner, the FTSE 100 conglomerate Associated British Foods (ABF), reported on Thursday.
The figures underline the difficulties faced by the retail sector, with companies ranging from Harrods to the Topshop owner, Arcadia, among the high street operators announcing more than 6,000 job cuts on Wednesday.
However, ABF said sales had been “reassuring and encouraging” since it started reopening Primark stores.
Primark was forced to close its 375 stores within 12 days after 22 March as governments around the world tried to slow the spread of the virus. However, it has since reopened all but seven stores in Scotland and one in the US, with new physical distancing protocols, hand sanitiser, extra cleaning and personal protective equipment for staff.
While many rivals have chosen to permanently close stores following the lockdown, Primark has opened five new stores since the beginning of March and plans five additional outlets in the next few months.
Sales were down 12% on a like-for-like basis since reopening some shops on 4 May, but ABF said sales in England and Ireland in the week ending 20 June were higher than last year, as non-essential retailers in England were allowed to reopen. Customers had been seen in lengthy queues for entry to Primark stores around the country.
John Bason, the finance director of ABF, said Primark continued to ring up sales at a stronger level than last year in the UK but the figures reflected early caution from shoppers.
Sales at city centre stores were still “suffering” from the absence of tourists and commuters. “Things are about to evolve. Hospitality and travel are non-existent at the moment,” Bason said.
Primark has no online shopping service, so has been particularly badly hit by lockdowns.
But Bason said Primark was not intending to change its business model after losing sales for a few weeks. “We consistently look at it and if we do something it will be something that works for Primark,” he said. However, he added: “There are no immediate plans.”
The retailer has had strong demand for children’s, leisure and nightwear, along with summer products including shorts and T-shirts. Demand for formal menswear and travel-related accessories was “unsurprisingly weak”, ABF said.
It added that – “absent a significant number of further store closures” – Primark’s operating profits, excluding exceptional charges, would be between £300m and £350m for the full year. That would be about a third of the £913m reported in the year to the end of September 2019.
The weakness in Primark sales was balanced by 9% higher revenues in ABF’s grocery business in the quarter. Revenues also rose in ABF’s food ingredients business.