Primark set to lose £1bn as sales drop 30%

Primark could lose £1 billion if store closures remain until the end of February.

The figure is up from the retailer’s previous estimate of a loss of £650 million, which was based on announced closure dates.

In its trading update for the 16 weeks to 2nd January 2021, the company reported a sales drop of 30 per cent compared to the previous year.

The budget retailer said that coronavirus restrictions, ranging from restricted trading hours to complete closure of stores, meant that across the 16 weeks it lost £540 million.

The company said it is implementing operational plans developed to manage the consequences of store closures the closures.

Overhead costs have been partially mitigated with some 25 per cent of operating costs of the closed stores being saved during the period.

“On this basis, we expect the adjusted operating profit for Primark in the first half to be broadly break-even, which would compare to an adjusted operating profit of £441m for the same period in the last financial year,” said Primark owner Associated British Foods. “We expect the group’s net cash before lease liabilities to be some £500m at the half year.”

It said that under the scenario that the entire estate is closed imminently, and remains closed until the end of March, the company would expect to see over the three-month period a further loss of Primark sales of some £0.8bn, and a consequent reduction in profit contribution of some £0.3bn.

Currently 305 Primark stores are closed, representing 76 per cent of the business.

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