Third-quarter sales for Associated British Foods (ABF) plunged by 39 per cent at constant currencies to £2.6bn – knocked by the closure of all Primark stores during lockdown. Indeed, the group’s retail arm saw revenues plunge by 75 per cent to £0.58bn – compounded by the fact that Primark does not offer online shopping, leaving it wholly reliant on bricks-and-mortar commerce. ABF now anticipates that adjusted operating profits for Primark will come in at around £300-350m for the full year – down by around two-thirds from 2019.
Still, such guidance was better than analysts were expecting. Broker Jefferies alone had estimated that Primark’s profits would land at £207m. ABF explained that its stores have reopened more quickly than envisaged since its early-June update, with 367 out of 375 now operational again. It added that trading has thus-far been both “reassuring” and “encouraging” – something not overly surprising, one might venture, given the images seen in recent weeks of enthusiastic consumers queuing up around the block. Demand has been particularly strong for children’s, leisure and night wear as well as summer clothing – albeit tempered by a lack of interest in formal menswear and travel-related goods.
Since the reopening of Primark’s first stores on 4 May, sales have amounted to £322m – 12 per cent lower than last year on a like-for-like basis. As momentum gathered with re-openings, sales for the week ending 20 June stood at £133m. Trading in England and Ireland was higher than the same week last year.
As ever, ABF constitutes a tale of two businesses – or rather two sectors. The group’s grocery division enjoyed improved sales volumes through its retail channel during the three months to 20 June, helping to mitigate weaker demand in foodservice. But sugar sales were knocked by logistical constraints at borders and ports in Africa. Even so, overall, ABF expects to report “strong progress” in the adjusted operating profits of these segments for 2020, along with agriculture and ingredients.
