Share

Coronavirus: Primark closes stores

Primark has been forced to close stores accounting for nearly a third of its sales, as European governments shut down high streets to prevent the spread of coronavirus. Owner Associated British Foods (AB Foods) said the budget retailer’s stores in France, Spain and Austria were expected to make sales of £190 million over the next…

Primark has been forced to close stores accounting for nearly a third of its sales, as European governments shut down high streets to prevent the spread of coronavirus.

Owner Associated British Foods (AB Foods) said the budget retailer’s stores in France, Spain and Austria were expected to make sales of £190 million over the next four weeks.

They represent about 20% of Primark’s selling space around the world.

Governments in the three countries have forced all non-essential stores to close as they try to put a lid on the spread of Covid-19, which has infected thousands.

READ MORE: Monday Interview: The scaffolding business built on foundations of hard graft

The World Health Organisation last week declared that Europe had become the epicentre of a global pandemic.

The outbreak has also seen sales falling elsewhere, as people stay away from high street shops. This includes the UK, where Primark makes 41% of its sales.

“We are managing the business appropriately but do not expect to significantly mitigate the effect of the contribution lost from these sales,” AB Foods said.

There was happier news from China. In February Primark had warned that its factories there were closing, which could have a knock-on effect on its supply chain.

However, most of the factories which supply it have now re-opened, the company confirmed on Monday.

“As a result, supply shortages from that country are now expected to be minimal,” AB Foods said in a statement.

The company added: “Our priority continues to be the health and safety of our colleagues, customers and partners.

“Each of our businesses are closely monitoring the current and potential effects of the outbreak on their operations.”

AB Foods said that in the first half of the financial year adjusted operating profit will be ahead of previous expectations, as Primark racked up better margins.

The owner of DIY chain B&Q has closed all 221 stores it owns in France as the country goes on lockdown over the coronavirus outbreak.

Kingfisher, which also owns Castorama and Brico Depot, added it had “taken measures to protect its colleagues and customers, to limit the impact on profitability and to preserve financial flexibility”.

READ MORE: Fife craft brewing venture has brought engineer satisfaction

All staff in France will continue to get paid but there were no immediate further details on what action has been taken to reduce costs.

It said it has formed a central committee to monitor the outbreak along with committees in its individual retail businesses.


They said sales continue to hold up well, but the French store closures will remain in place until April, and 28 stores in Spain will be shut for the next two weeks.

Kingfisher also attempted to reassure investors that it would not run out of cash, pointing out it has £195 million cash in the bank and access to two credit lines worth £775 million. Overall it can access more than £1 billion in cash, if required.

It added: “Given recent government actions and the heightened impact and uncertainty of changes in the magnitude, duration and geographic reach of Covid-19, we are not yet able to predict the impact of Covid-19 on our 2020/21 full-year results.”

Staff have seen travel restrictions imposed and flexible working arrangements, including home-working where possible.

Supply chains in China and the Far East, which make up 25% of total goods sold, are also starting to reopen, with 85% of orders having a less than four-week delay. Products from Italy are also still flowing, with factories remaining open.

The company added that as of Saturday March 14, there has been no impact on sales, with the first two weeks of the month in positive territory.

It added: “However, there is significant uncertainty on sales and demand as the outbreak spreads, and as central governments and businesses take action to contain and delay its impact.”

Chief executive Thierry Garnier said: “We are committed to supporting local authorities and governments to limit the spread of the virus, and the health and safety of our colleagues and customers remains our top priority.

“Our teams are also evaluating the best ways to satisfy emergency needs in our markets, particularly for electricity, heating and plumbing.”

The company behind Paddy Power and Betfair has warned it faces an “unprecedented” challenge as sports matches and leagues are cancelled because of the Covid-19 outbreak.

Flutter Entertainment, which gets nearly 80% of its revenue from bets on sporting events, said its accounts will be seriously dented.

All Premier League football games have been postponed in England until the beginning of next month, while the major leagues in Spain, Italy, France and Germany have been indefinitely suspended.

READ MORE: Fiona Hodgson: Why plumbing industry is thriving in an age of robotics

Horse racing is continuing, although behind closed doors in places, but many major sports have been suspended in the US. The European football championships, Euro 2020, are also likely to be postponed, Flutter said.

“This will obviously have a material impact on the revenue and earnings of the group,” it said in a statement to shareholders on Monday.

Chief executive Peter Jackson said: “The challenge currently facing our business and the industry more widely is unprecedented in modern times.


“Our focus, first and foremost, is on protecting the welfare of our employees and our customers and we will leave nothing to chance in this regard.”

As it does not know when the regular sports schedule will start up again, and which other sports might decide to follow suit, Flutter said it is difficult to gauge the financial impact.

But if restrictions are still in place until the end of August, and Euro 2020 is cancelled, full-year ebitda (earnings before interest, tax, depreciation and amortisation) will take a £90 to £110 million hit.

If horse racing fixtures are cancelled as well, and its UK and Ireland betting shops are forced to close, this could cost the company another £30 million per month in ebitda.

Analysts at Jefferies had previously expected ebitda to reach £428 million in 2020.

Mr Jackson said: “While our near-term profitability will be impacted by the essential measures being taken globally, the board will remain focused on protecting shareholder value and managing the business through these turbulent times.”

Read More

Leave a Comment