Alongside details of plans to reopen its Primark stores following the lockdown, Associated British Foods (ABF) gave some insights into how its food & drinks business has been performing.
The group, which owns brands such as Twinings, Kingsmill, and Patak’s, has maintained production at all of its food business facilities, despite the “operational challenges” arising from the coronavirus outbreak.
ABF stated that operating profit in its Grocery division will be ahead of its previous expectations with stronger sales of branded products sold through the retail channel, more than offsetting weaker sales in foodservice.
However, the group added that it now expects a lower profit from its AB Sugar unit following further “disappointing performance” at Illovo.
Meanwhile, ABF confirmed today that all 153 of its Primark stores in England will reopen on 15 June after the government last week announced an easing of restrictions on non-essential retailers.
Primark had previously disclosed that the lockdown was resulting in a loss of sales of approximately £650m a month. However, the business has managed to reduce its overheads by more than 50% during the pandemic in order to stabilise its finances.
The value-oriented fashion retailer has already reopened 112 stores outside the UK, in countries such as Germany, Spain and the Netherlands, with social distancing and safety measures in place.
It said trading in its reopened stores “has been both reassuring and encouraging, with customer queues outside most stores and, once in store, spending on larger basket sizes”. However, like-for-like sales are down in reopened stores, with sales at four city centre stores 50% below last year due to the absence of tourism and lower commuter footfall.
Primark has been particularly badly hit by the crisis because of its lack of an online store, meaning it has built up a large volume of unsold clothes. The company confirmed today that it plans to hold back some of the unsold stock until summer next year, while gradually work through the excess of non-seasonal basic clothing items without using heavy discounting as seen by other retailers such as Marks & Spencer.
Primark’s 37 stores in Northern Ireland, Scotland and Wales will remain closed until local governments give further guidance on when non-essential retailers can reopen.
NAM Implications:
- Food business performance as expected.
- Primark more of an issue, given restrictions on the clothing category.
- However, given large retail gross margins, storing for a year will be less costly.
