Primark-owner Associated British Foods (ABF) has warned its budget clothing chain faces a massive £375 million loss of sales due to store closures mandated under fresh government restrictions across Europe and Boris Johnson’s proposed second lockdown of England.
The fashion, groceries and sugar conglomerate also cautioned that ‘uncertainty about further temporary store closures in the short-term remains’, sending shares 2.6% lower to £16.53 on Monday.
SHUTTING UP SHOP, AGAIN
In today’s Covid-19 update, Associated British Foods explained that Primark’s stores in the Republic of Ireland, France, Belgium, Wales, Catalonia and Slovenia, which together speak for 19% of the chain’s total retail selling space, are now temporarily closed.
Assuming the UK parliament passes the government’s proposed shuttering of non-essential shops in England for one month from 5 November, then 57% of Primark’s total selling space will be temporarily shuttered.
SAY GOODBYE TO £375 MILLION
‘Our estimated loss of sales for these stores, including the stores in England, for the announced periods of closure is £375 million,’ lamented Associated British Foods, which will still issue results for the full year to 12 September as planned tomorrow.
The latest raft of pandemic-driven lockdowns are a severe blow for Associated British Foods, which enjoyed better-than-expected trading at Primark, thanks to the cut-price clothing chain’s value-for-money offering and Covid-safe stores, and its food businesses, in the fourth quarter.
Associated British Foods also alerted investors that ‘trading hours are also restricted in a number of other markets’, adding that ‘uncertainty about further temporary store closures in the short-term remains’.
The company is implementing its operational plans to manage the consequences of these shop closures and will be looking to reduce operating costs. ‘All orders placed with our suppliers will be honoured,’ insisted Associated British Foods, which reflects well on the business.
Sticking with its ‘buy’ rating on Associated British Foods, and noting the group has over £3.1 billion of group liquidity, Shore Capital commented: ‘Whilst uncertainty for full year 2021 has increased we see the current price as a compelling entry point to a very high quality, strongly cash generative business with leading positions in European Retail, Global Sugar and an excellent stable of valuable Grocery brands.’
