Primark owner warns of coronavirus’ impact on supply

Primark owner AB Foods has warned of the impact the coronavirus could have on supply for the retailer if disruption caused by the epidemic in China is prolonged.

In a pre-close trading update, AB Foods said while the clothing retailer was “well stocked” in the short-term, if delays to factory production are prolonged the “risk of supply shortages” on some of its lines later in the financial year “increases”.

“We are assessing mitigating strategies, including a step up in production from existing suppliers in other regions,” it added.

The news comes as it revealed half-year sales at Primark are expected to be 4.2% ahead of last year at constant currency, driven by “increased retail selling space” and level like-for-like sales.

However, it added that operating profit is expected to be marginally down on last year at constant currency and on a lease-adjusted basis. On a reported basis operating profit will be ahead of last year.

In the UK, clothing sales are expected to be 3% ahead of last year, driven by a “strong contribution” from new selling space but was partially offset by a 1.3% decline in like-for-like sales.

AB Food added that trading was “particularly good” over November and December but weakened in January and February against “very strong comparatives” in the prior year.