Covid-19: Primark to suffer £284m stock hit
Associated British Foods (ABF) has revealed that Primark will take a £284m hit in stock following store closures amid the ongoing pandemic.
ABF said the prediction was made following a “careful review” of its inventory, and added that the retailer had fully paid for and taken delivery of “very large amounts of completed stock” which it is now unable to sell.
The group ensured that “everyone in a vulnerable country who worked on a Primark garment, whether completed or not, is paid for that work”. It is also supporting suppliers with commitments to buy garments that are as yet unfinished.
In the latest trading update, it was also confirmed that 68,000 Primark staff have been furloughed in light of the ongoing crisis.
The fashion retailer said it “has been squarely in the path of this pandemic”, going from monthly sales of £650m to zero sales since store closures on 22 March.
Nonetheless, ABF group revenue was up 2% to 7.6bn in the half-year ended 29 February 2020. Statutory operating profit was down 38% to £349m, however, whilst statutory profit before tax was down 41% to £298m.
George Weston, CEO of ABF, said: “The group delivered an encouraging trading performance in the first half.
“The rapid spread of COVID-19 has impacted all of our lives and the human tragedy that continues to unfold has shocked and saddened us all.”
He added: “Primark is managing through an extraordinarily challenging period after all of its stores closed in March and our management response to mitigate the cash outflows was swift and proportionate.
“Although uncertainty remains, we have the people and the cash resources to meet the challenges ahead.”
In the same update, Weston published his “personal reflections” amid the ongoing crisis, and paid tribute to two employees who sadly lost their lives to the virus within the last three weeks.
He said: “Many of us have vulnerable relatives and friends we must protect and I am sure we all know people working under huge stress in the NHS and in health and care services around the world.”
Weston added that despite his desire to reopen Primark stores across the UK, Continental Europe and the USA, the group “must not do so until we have suppressed this disease”.
He continued: “And when we are allowed to reopen we must make our Primark stores safe for our staff and our customers, even if that means ensuring there are fewer people shopping at any one time and so accepting lower sales at least until the remaining risk is minimal.
“In time we can rebuild the profits. We can’t replace the people we lose. I am in awe of the Primark teams for their care, good judgement and immense hard work as they have managed this crisis.”
