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Primark owner AB Foods reinstates dividend

Primark to forgo £700m of sales in H2

Primark confirmed on Tuesday that its operating profit fell by 90% to £43m in H2 as the budget fashion brand raised its estimate for the volume of sales that will be lost due to trading restrictions in the second half of the current year.

Associated British Foods (LON:ABF), Primark’s parent company, said in its trading statement that while many stores in the UK have set trading records since returning to business on April 12, trading across the continent has been mixed.

While many stores have reopened with restricted trading in place, a number have seen delays. Subsequently, Primark is expecting to miss out on £700m in H2, up from an earlier estimate of £480m.

Primark said its US operations had made a profit and that the reopening phase in Europe would be particularly cash generative as already paid-for stock is sold on.

The retailer plans to repay £121m from the UK government’s furlough scheme, set up to protect workers during the coronavirus pandemic, ABF said on Tuesday, while confirming that it will pay an interim dividend of 6.2p a share in July.

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The outlook for AB Foods’ sugar, grocery and ingredients businesses in the second half was also muted after an “exceptional” first six months.

Chris Beckett, head of equity research at Quilter Cheviot, commented on Primark’s bounce following the reopening of the UK:

“Primark was clearly going to be a big beneficiary from the economic re-opening after a £3bn hit to sales experienced during the pandemic. But while we saw pictures of queues outside many stores last week, it is pleasing to have confirmation that Primark stores generated record sales in England and Wales, some 40% of their total global selling space, in the first week after reopening, showing strong pent-up demand from consumers for value-for-money clothing,” Beckett said.

“Over half the stores in England and Wales broke their own sales records, showing the strength of demand from consumers to spend their cash. Unlike in previous re-openings, Primark has seen more demand for fashion ranges rather than more essential items like nightwear, and per-person spending has improved.”

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