Associated British Foods (ABF) has warned that sales for its Primark business are taking a major hit from the coronavirus outbreak. With developments in Italy, France, Spain and Austria, stores accounting for a fifth of Primark’s selling space are now closed until the respective governments allow them to open again. Those shops account for 30 per cent of Primark’s sales – and ABF had anticipated revenues of £190m from them over the next four weeks.
Meanwhile, the remainder of ABF’s store estate – including the UK, which represents 41 per cent of sales – has endured like-for-like declines over the last fortnight, and more emphatically in recent days because of lower footfall. ABF does not expect to be able to make up for these lost sales. Retail made up £7.8bn or 49 per cent of the top line for the year to September 2019.
But Primark is just one part of the ABF portfolio. Its other areas – sugar, grocery, ingredients and agriculture – have not seen a material impact from Covid-19. The group added that it has a robust balance sheet with £800m of net cash at the half-year end and significant undrawn banking facilities. It plans to update shareholders again with its interim results on 21 April.
ABF flagged that first-half adjusted operating profits will be ahead of its previous expectations, because of higher margins for Primark and its grocery division. It added that with the improving situation in China, most factories supplying Primark have re-opened – leading to minimal supply shortages. That is all well and good – but demand shortage is quite another issue.
