Associated British Foods PLC says Primark makes record sales last week but second
The Grocery, Sugar, Agriculture and Ingredients segments will normalise after an exceptional interim performance
() said Primark delivered record sales in the first week after reopening in England and Wales but performance in the second half is expected to be softer than the first for the wider group.
Over half of the stores of the fast-fashion retailer, which doesn’t have an e-commerce platform, broke their own sales records after UK Coronavirus (COVID-19) restrictions were eased.
READ: Shoppers queue outside AB Foods’ Primark on first day of reopening despite bad weather
The performance was driven not only by increased basket sizes, as seen after previous lockdowns, but also by an improvement in footfall across all high street, shopping centre and retail park locations to bring footfall for the whole estate back to pre-pandemic levels.
Demand for nightwear, lingerie and leisurewear continued to be strong however, compared to previous reopenings, there was huge demand for fashion ranges, particularly in womenswear.
The FTSE 100 group expects the period after the reopening of stores to be very cash generative as it sells the higher than normal inventory on hand, although profits are estimated to be “somewhat lower” than last year.
By the end of the month, 80% of Primark selling space across its markets will reopen, while eight new sites will start trading in the remainder of this financial year.
Following the “exceptional” performance of the Grocery, Sugar, Agriculture and Ingredients businesses in the first half, AB Foods forecast a softer performance in the second half.
Full-year profit for Sugar will be ahead of last year and in line with expectations, as the profit recovery in Illovo primarily benefited the first half but further recovery in the second half will offset the one-time costs associated with the recommissioning of a bioethanol plant in Hull, UK.
Full-year profits at Ingredients and Agriculture are expected to be in line with last year with the impact of higher commodity costs affecting the second half.
Grocery volumes are expected to be softer in the second half compared to the very strong retail channel sales experienced last year at this time and margins will be impacted by significantly higher US commodity vegetable oil costs.
In the 24 weeks to 27 February, revenue slipped 17% to £6.3bn while adjusted profit before tax halved to £319mln.
The group resumed dividend payments and will pay a distribution of 6.2p per share in July while it will also repay the job retention scheme monies to the government.
“Management highlighted the value of the food side of things this morning but, if anything, its inability to keep the group in the black shows just how dominant the Primark segment is for ABF,” said Dan Lane, analyst at Freetrade.
“The danger in the sector will be in trying to influence what shoppers are willing to pay now. UK household savings rates went through the roof last year as we couldn’t get out to spend and that might be an irresistible prospect for footfall-starved retailers.”
“The temptation will be to rake out all the old stock and shift it at knock-down prices, or bump up the price of new products to make back some of last year’s lost earnings. It’s a risky strategy but this is a tightrope Primark doesn’t really have to walk. Given any easing so far, the UK has shown it is ready to queue up at length for a trip round its stores.”
Shares dipped 2% to 2,418p.
–Adds analyst comment, shares–
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