'Phenomenal' sales boost Primark after lockdown ends

The fashion chain has seen long queues outside its branches as shoppers prove eager to buy clothes again.

However, the firm’s parent, Associated British Foods (ABF), said the second national lockdown in England, along with regional lockdowns and restrictions, has knocked £430m off sales.

The retailer has recovered some of the costs, with overheads falling 25 per cent during the autumn lockdowns, and there are early signs that reopened stores are seeing what the group’s finance chief called “phenomenal” sales.

To maximise sales and spread out customer numbers, some sites have continued trading through the night, while others have extended opening hours.

ABF said 34 stores remain temporarily closed, including all outlets in Northern Ireland and Austria, representing 7 per cent of Primark’s total retail selling space.

This compares with 62 per cent when the highest number of stores were closed in November. Last month the group predicted sales would be hit by £375m.

The company’s chairman, Michael McLintock, said: “Sales in the days since reopening in each of these markets have once again been very strong, reflecting the excitement and appeal of the Primark offering.

“We have extended the opening hours during this festive season in most of our stores in the Republic of Ireland and England to cater for the anticipated higher customer demand and to help ensure a safer environment by spreading shopping hours over a longer period.”

He also had an update on post-Brexit transition plans, saying that the firm’s preparations are complete.

“Following the UK’s exit from the EU, our businesses have completed all practical preparations for the end of the transition period this month and contingency plans are in place should our businesses experience some disruption at that time,” he said.

Since the start of this financial year, new stores have been opened in the US – in New Jersey and Florida – with an encouraging performance from its remaining sites.

Strong sales were also seen in the company’s first store in Rome in Italy, and a fifth site was opened in Barcelona, Spain.

Mr McLintock said: “Notwithstanding the currently announced periods of restriction, we continue to expect Primark sales and profit to be higher this financial year compared to last. We will continue to expand retail selling space.”

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 profits to reach higher levels than last year.

“At a time when rivals on the high street like Top Shop, Debenhams and Bonmarche face being wound up or sold, Primark is proving highly resilient.”

Ms Streeter said Primark doesn’t have an e-commerce arm to offset store closures, but it does have 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,” she added.

“The pain of the lockdowns will also have been eased by a 25 per cent 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 owns a number of grocery brands, a sugar business and agriculture division, which have performed well.

However, the company said its forecast for UK sugar production for 2020/21 is now 0.9 million tonnes – lower than previously expected.

This is down from 1.19 million tonnes, due to the severe impact of virus, yellows disease, on sugar beet, although profits are likely to remain strong.

Ms Streeter said: “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.”