British clothing retail chain Primark has gone from making £650m in sales per month to nothing, due to the coronavirus pandemic.
The global lockdown has forced the retailer to close all its stores across Europe and the US.
Primark’s owner – Associated British Foods – ‘has been squarely in the path of this pandemic’ according to CEO George Weston.
He continued: “From making sales of £650m each month, since the last of our stores closed on 22 March, we have sold nothing.”
Furlough support is not available to many of its employees across Europe, and Weston revealed that many of its 70,000 staff could be made redundant.
Associated British Foods has paid its suppliers for stock it has received and has announced that it will set up a fund to ensure its workers who make its items are paid
George Weston, Chief Executive of Associated British Foods (owner of Primark), said: “The rapid spread of COVID-19 has impacted all of our lives and the human tragedy that continues to unfold has shocked and saddened us all. We are a strong, diversified and resilient group. Our people are working hard to maintain supply from our food businesses.
“Primark is managing through an extraordinarily challenging period after all of its stores closed in March and our management response to mitigate the cash outflows was swift and proportionate. Although uncertainty remains, we have the people and the cash resources to meet the challenges ahead.”
The shares fell 3.2% following the announcement.
Sophie Lund-Yates, Equity Analyst at Hargreaves Lansdown
When Primark was ordered to shut its doors mountains of inventory was already on its way, ready to replenish stores which are in hibernation. Warehouses are now bursting with £1.5bn of stock ABF can’t sell at the moment. That means the retail giant has been forced to absorb hefty exceptional costs. For consumers this could mean bumper sales when shops reopen, as sales stickers are one of the quickest ways to shift excess items, but at the cost of margins.
The problems won’t all be solved when shops can reopen. The group outlined safety would continue to be a consideration, and is prepared to accept lower sales until the risk has been minimised. We may not see revenues go from zero to hero overnight.
To the group’s credit, it’s much more than just retail. Its various food businesses mean ABF is an essential cog in the UK’s food machine, so a good proportion of revenue is still intact. Looking ahead the group’s priorities will be steadying the Primark ship, as well as protecting the supply chains and manufacturing capabilities of the food businesses during the disruption.