Primark trading ‘stronger than expected’ post-lockdown

Associated British Foods (ABF) has announced that Primark’s trading in the fourth quarter has “exceeded expectations” ahead of its full-year results, which are set to be announced on 3 November.  

Primark stores reopened over the course of May, June and July, and have since “traded strongly”, according to its parent group.  

Cumulative sales since reopening to the year-end are expected to be £2bn, while its adjusted operating profit is now expected to be “at least at the top end” of the previously advised £300m to £350m range.

Nonetheless, ABF noted that total customer spend on clothing, footwear and accessories was impacted by Covid-19, though the rate of recovery has accelerated since the reopening of stores.

Since reopening, rising footfall has driven increased transactions, while basket size was initially “significantly higher” than last year, reflecting pent-up demand.

ABF noted that while this outperformance has reduced in recent weeks, it remains higher than a year ago, while sales in aggregate have been “reassuring and encouraging” since reopening. 

In the UK, sales since reopening are expected to be 12% lower on a like-for-like basis overall, however. If the four large UK destination city centre stores are excluded, however, this decline is 5%.  

Meanwhile, sales in Europe are expected to be 17% lower on a like-for-like basis, while sales in the US are expected to be 9% lower on a like-for-like basis.

It comes as the group recognised an exceptional charge of £284m against inventory on hand and yet to be delivered.  

Nonetheless, the earlier than expected reopening of stores and stronger than expected trading over the summer has enabled the retailer to sell in-store stock, as well as a “significant” proportion of the stock on hand. 

ABF said: “The cash generated by the sale of this stock on hand is the major contributor to our better net cash balance at the year-end.  

“We will review both our stocks on hand and our commitments at the year-end and expect this to result in a significant reduction in the exceptional charge.”