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Primark first-half sales on track to fall 40% but the retailer still expects to break even and to flourish once store reopen

Primark's Bullring store features cafes and restaurants

First-half sales at Primark are expected to be 40% – or £1.5bn – down on the same time last year after Covid-19 lockdowns forced store closures at the store-only retailer in most of its markets. It is, however, expecting to break even and anticipates strong sales once more of its stores can open.

Its parent company Associated British Food (ABF) estimates, in a pre-close trading update for the first half of its financial year, that Primark’s sales will come to £2.2bn in the 24 weeks to February 27, down £1.5bn – or 40% – from £3.7bn a year earlier. And it says that adjusted operating profits at the division will be “marginally above break even”.

It estimates Primark has lost £1.1bn in sales directly through store closures, while it has also seen sales 15% lower when stores were open since fewer shoppers visited. Where stores were open during peak trading, Christmas and gifting lines sold out and ‘stay at home’ products such as nightwear and loungewear also sold well, with lower levels of markdown than the same time last year.

“This performance,” says ABF in today’s trading statement, “should be seen in the context of lower category spend and lower footfall reflecting government advice to limit journeys from home.”

It adds: “Performance has varied by store reflecting the prevailing circumstances of our customers including home working, less commuting and try little tourism. Like-for-like sales at our stores in retail parks were higher than a year ago, shopping centre and regional high street stores were lower than last year and large destination city centre stores, which are heavily reliant on tourism and commuters, continue to see a significant decline in footfall. Excluding our 16 major city centre stores, trading was at -11% on a like-for-like basis.”

The retailer is currently trading from 77 of its 233 shops – representing 22% of its retail selling space. But it expects that by April 26, 83% of its retail selling space will be open – and that the period after that will be “highly cash generative”. It expects to sell £150m of spring and summer inventory left over from last year, and says that the coming autumn/winter season will benefit from £280m in stock held from the first half of its financial year. 

In the first half of the year it added six new stores and expects to increase that to 15 by the end fo the year, with new openings markets including Spain, Italy and the UK.

Overall, ABF expects to see revenue and profits come in ahead of expectations and ahead of the same time last year in its grocery, sugar, agriculture and ingredients business. 

Commenting on Primark’s figures, Pippa Stephens, retail analyst at analytics and data company GlobalData says: “As the retailer continues to resist introducing a transactional website to its operations, despite consumers’ rapid shift to purchasing fashion online during the pandemic, its strong presence in international markets outside of the UK has provided a lifeline during these trying times. Stores in several of its EU markets are still trading, albeit with some reduced opening hours, while performance in the US has also been promising, aiding its adjusted operating profit to reach slightly above break-even for the period.”

She adds: “Following the UK government’s recent announcement outlining the country’s roadmap out of Covid-19, retailers are now able to make more informed decisions about their future ranges. While Primark reported strong sales for nightwear and loungewear in H1, demand in the second half is likely to experience a rapid shift towards more trend-led products, such as day dresses and blouses, as the opening of UK retail synchronises with outdoor hospitality, with hope instilled for a return to normality as quickly as June.”

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