Associated British Foods feel coronavirus effect, as Primark sales stumble

Associated British Foods PLC (LON:ABF) have told shareholders that their Primark retail business could face significant bruising from the ongoing coronavirus pandemic – in an update published this morning.

“Our priority continues to be the health and safety of our colleagues, customers and partners. Each of our businesses are closely monitoring the current and potential effects of the outbreak on their operations” – the firm noted.

The firm noted that due to the recent outbreak of COVID-19, this could lead to a £190 million loss in sales over the next month – mainly due to store closures.

Associated British Foods mentioned that due to government lockdown’s in  France, Spain, Austria and Italy, stores have been forced to close.

Looking at their UK business, Primark sales have declined over the last two weeks due to less foot fall and a challenging trading environment.

The firm said that for the first half, adjusted operating profit will be ahead of expectations – mainly due to higher margins for Primark and Grocery. As a result, adjusted earnings per share for the first half will now be ahead of last year on both a lease-adjusted and a reported basis.

The firm commented today: “In our February trading statement we described the risk to supply of goods from our suppliers in China. Since then, the situation in China has improved, with most factories supplying Primark having re-opened. As a result, supply shortages from that country are now expected to be minimal.

However, with developments over the last week in Italy and, more materially, over the weekend in France, Spain and Austria, stores accounting for 20 percent of Primark’s selling space are now closed until the respective governments permit them to re-open.

Importantly, in aggregate we have not seen a material impact in our sugar, grocery, ingredients and agriculture businesses.

Given the effect of COVID-19 on Primark’s sales, it is too early to provide earnings guidance for the remainder of the current financial year”.

Associated British Foods try to limit impact

Roughly three weeks back, the firm noted that the coronavirus could affect interim results – which gave shareholders a pre warning.

The multinational firm have said that they expect to announce their interim results at the end of April – however the recent outbreak of the coronavirus may dampen these.

Primark sales and performance remained strong – the firm said, and that this retail business is yet to be impacted by the coronavirus.

The first half ends on February 29 for AB, and the firm said that expects growth in sales and adjusted operating profit to rise from £639 million from a year ago.

Looking at the performance of their retail brand Primark, AB Foods have said that they expect first half sales to be 2.5% higher year on year, and 4.2% at constant currency.

On a reported basis, Primark’s first half operating profit will be ahead of the prior year – with UK sales expected to be 3% higher and EU sales rising 5.3% at constant currency, helped by growth in France, Belgium and Italy.

Shares in AB Foods trade at 1,629p (-11.17%). 16/3/20 10:20BST.

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