Primark owner profit slumps as pandemic batters sale
Primark owner Associated British Foods (ABF) has posted a sharp decline in profit for the full year as store closures during the coronavirus lockdown decimated sales.
The figures
ABF posted revenue of £13.9bn in the year to 12 September, down 12 per cent on 2019.
Statutory pre-tax profit slumped 42 per cent to £686m.
Basic earnings per share tumbled 48 per cent to 57.6p.
Net debt including lease liabilities stood at £2.1bn.
Why it’s interesting
ABF’s full-year figures highlight the extent of the damage caused by coronavirus after the company was forced to shutter its shops during lockdown.
The group’s decline in revenue was mainly driven by its performance in the third quarter, when Primark sales were wiped out for the period.
The company said it cut costs by 50 per cent by reducing capital expenditure and making use of the government’s furlough scheme, but was still burning through £100m per month.
The reduced sales and higher net exceptional charges also took their toll on profit, which slumped more than 40 per cent over the year.
ABF said it estimated the Covid-19 outbreak cost Primark £2bn in sales and £650m in profit.
The retailer said the reopening of Primark stores had allowed sales to bounce back more quickly than expected, sparking a better-than-expected performance in the fourth quarter and allowing the company to build its cash reserves.
As a result, net cash balance before lease liabilities was £1.56bn at the end of the year.
But Primark yesterday warned that it expected a £375m sales hit as a result of new lockdown measures in England.
The budget fashion chain is already contending with closures elsewhere in Europe, and the new measures will lead to the temporary closure of 57 per cent of its selling space.
Despite this, ABF said it expected Primark to post higher full-year sales and profit next year, with higher sales in the second half offsetting closures over the coming month.
Troubles at Primark were partially offset last year by improved performance in ABF’s grocery division as people stocked up on baking ingredients during lockdown.
Operating profit in the group’s grocery, sugar, ingredients and agriculture division grew 26 per cent over the year.
What ABF said
“I am proud of how our people have responded to the many challenges presented by Covid-19,” said chief executive George Weston.
“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.”