Primark endures £430m hit to sales due to COVID lockdowns

Budget retailer Primark unveiled a £430m ($577m) hit in sales from autumn COVID-19 restrictions across the UK, the lockdown in England and the rest of Europe.

But despite the higher than expected knock, its owner Associated British Foods (ABF.L) said that the chain remains on course to deliver improved profits.

It revealed that it recovered some of the costs, with overheads falling 25% during the autumn lockdowns, and early signs that reopened shops are “seeing strong sales.”

ABF said it expected this financial year, which runs from September, to produce higher sales and profits compared to the previous 12 months.

Closures at the start of its new financial year has seen a four-week shut down in England and a host of other curbs in Scotland, Wales and Northern Ireland.

Other markets, such as the Republic of Ireland, France and Belgium, which also had restrictions all reopened in the last week.

Primark stores across England reopened on Wednesday following the end of the month long lockdown. The reopening saw its customers form long lines outside Primark stores to shop.

Some of the chain’s sites have continued trading through the night, while others have extended opening hours, to maximise sales and spread out customer numbers.

ABF said 34 stores remain temporarily closed, including all outlets in Northern Ireland and Austria, representing 7% of Primark’s total retail selling space. This compares with 62% when the highest number of stores were closed in November. Last month bosses had predicted sales would be hit by £375m.

READ MORE: Bonmarché falls into administration in third high street collapse in three days

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “The cost of the latest lockdown was the final nail to hammer ABF’s competitor Arcadia group, pushing it into administration.

“So it comes as little surprise that the Primark owner now says the forced shuttering of stores was an even bigger hit to sales than first forecast, now putting the price at £430m. Remarkably, despite this sizeable hole in revenues, ABF still expects to profits to reach higher levels than last year. At a time when rivals on the high street like TopShop, Debenhams and Bonmarche face being wound up or sold, Primark is proving highly resilient.

“It doesn’t have an e-commerce arm to offset store closures, instead it has a highly loyal customer base, who have waited until stores reopened to satisfy their pent up shopping desires. In a repeat of the pattern seen after the first lockdowns, shops across England, the Republic of Ireland, Belgium and France reopened in the last week and sales have been strong.

“The pain of the lockdowns will also have been eased by a 25% reduction in operating costs in stores. Primark’s strong brand and defiant growth despite Covid-19 causing havoc for sales elsewhere on the high street, means ABF is continuing with plans to take on new retail space. In the UK, it is likely to have easy pickings in prime locations in the future, given the demise of its rivals. ABF’s food arm isn’t dragging down sales either with trading across groceries, ingredients and agriculture ahead of expectations and last year’s levels.’’

The news comes after a bloodbath week, with three big fashion names collapse into administration. Bonmarch and Arcadia collapsed and Debenhams announced it was winding down.

WATCH: How end of Debenhams will hit UK’s cities and towns