Primark profits plunge 60% to £362m

Primark owner Associated British Foods (LON: ABF) has posted a 60% drop in profits to £362m.

The retailer saw a 24% fall in revenue in the year ended September 12, which was driven by store closures in the third quarter during the lockdown.

Since reopening sales have recovered but are still down 12% in the UK and 17% lower across European stores.

Thanks to the government’s furlough scheme and reducing expenditures, Primark cut costs of 50% during the lockdown.

The group warned yesterday that a second lockdown would hit sales by £375m.

“As of today, all Primark stores in the Republic of Ireland, France, Belgium, Wales, Catalonia in Spain and Slovenia are temporarily closed, which represent 19% of our total retail selling space,” said the group.

“The announced period of closure varies by market. The UK Government announced its intention to close non-essential shops in England for one month from 5 November to 2 December. Assuming that this will be passed by the UK Parliament on 4 November, 57% of our total selling space will be temporarily closed from 5 November.”

“Our estimated loss of sales for these stores, including the stores in England, for the announced periods of closure is £375m.”

Chief executive of ABF, Geroge Weston, commented on the latest trading update:

“I am proud of how our people have responded to the many challenges presented by Covid-19.

“Throughout, we have provided safe, nutritious food under the most extraordinary conditions, proving the value and resilience of our supply chains. Our food businesses delivered an adjusted operating profit increase of 26 per cent, driven by high demand and improved productivity.

“Following a three-month closure, Primark delivered a robust performance, receiving an overwhelmingly positive response when it safely welcomed customers back to its stores. Uncertainty about temporary store closures in the short-term remains, but sales since reopening to the year end of £2bn demonstrate the relevance and appeal of our value-for-money offering.

“We have the people and the cash resources to meet the challenges ahead and we are investing for the future.”

ABF shares (LON: ABF) are trading -1% at 1.704,00 (0942GMT).

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Safiya focuses on business and political stories for UK Investor Magazine. Her interests include international development, travel and politics.