Associated British Foods PLC expects £1.1bn interim sales loss from Primark

() said the latest closures of its Primark stores have caused an estimated £1.1bn loss in sales with a £650mln cash burn.

The FTSE 100 firm has already reopened 77 of the fast fashion retailer’s sites overseas and has likely reopening dates for 233 shops after the UK government announced its plan to ease COVID-19 restrictions earlier this week.

READ: AB Foods keeps Primark offline while rivals boohoo, ASOS post strong lockdown sales

It means that 83% of its retail selling space should be trading by April 26, but the budget clothier still expects to lose £480mln in sales in the second half.

Primark, which doesn’t have an e-commerce platform, is planning to open 15 new stores in 2021 and continues to add others to the pipeline.

In the 24 weeks to February 27, Primark is expected to deliver £2.2bn in sales, down from £3.7bn a year ago, while adjusted operating profit is estimated to be marginally above break-even and down from last year’s £441mln.

When stores were open, sales were down 15% compared to last year due to lower category spend and lower footfall as people were still encouraged to stay home and because of restricted trading hours.

The Christmas and gifting lines were sold out and the performance for ‘stay at home’ product categories was strong, while around £260mln of autumn/winter stock is on hold for later this year.

The group’s net cash before lease liabilities is set to be around £650mln at period-end, while the cash outflow in the first half is expected to be some £900mln, also because of seasonal spend in the sugar business.

Alongside the grocery, agriculture and ingredients businesses, sugar is forecast to top both expectations and the first half of last year in terms of interim revenue and profit.

The food side of the conglomerate is benefitting from higher average sugar prices and higher demand for food products during lockdowns.

The agriculture arm in China will deliver a significant improvement with earlier phasing of sugar beet feed sales, the benefit of cost improvement projects and strong feed sales into the pig market, as the pig population is recovering African Swine Fever.

“While it will likely need the completion of the vaccination programme across Western Europe for trading at Primark to return to normal levels, we believe the recent exit of major brick and mortar peers including the Arcadia Group and Debenhams, as well as store closures by the likes of John Lewis throws a major opportunity for Primark to take market share as well as expand into new space in a reshaped UK clothing retail market,” analysts at Liberum commented.

“US and Eastern Europe continue to provide many more years of space expansion opportunities to the business.”

Shares rose 1% to 2,458p on Wednesday morning.

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