Primark-owner, Associated British Foods (ABF), has sounded a warning on its half-year sales as traffic in its stores slows with the impact of the coronavirus outbreak intensifying.
ABF says it expects for the first half, group adjusted operating profit will be ahead of its previous expectations, mainly due to higher margins for Primark and its grocery division. Adjusted earnings per share will be ahead of last year’s first half.
Most of its China supplier factories are back up and running since it raised concerns of supply shortages in February so it now expects the impact on supply from China to be minimal. But it has warned on half-year revenues, given many of its locations across Europe are closed.
“With developments over the last week in Italy and, more materially, over the weekend in France, Spain and Austria, stores accounting for 20% of Primark’s selling space are now closed until the respective governments permit them to re-open.
“These stores currently generate 30% of Primark’s sales…We had expected sales of GBP190m (US$233m) from these stores over the next four weeks. The remainder of the estate, including the UK which represents 41% of sales, has seen like-for-like sales declines over the last two weeks and these have accelerated over the past few days as a result of reduced footfall. We are managing the business appropriately but do not expect to significantly mitigate the effect of the contribution lost from these sales.”
The group adds, 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.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataDarren Shirley, analyst at Shore Capital, comments on the announcement: “Whilst considerable uncertainty remains, we view ABF (and Primark) as high-quality businesses that will be well very positioned to drive sustained growth once the challenges of COVID-19 are worked through. We are not able to say this with any confidence for some Primark’s UK apparel peers, noting the likes of New Look, Arcadia and Debenhams amongst others.”
