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Primark aims for June 15 England re-opening from Covid lockdown

By Frank Prenesti

Date: Monday 01 Jun 2020

(Sharecast News) - Associated British Foods said it was working to re-open all its Primark Stores in England on June 15 as the government relaxed coronavirus lockdown rules.
The company on Monday said it expected to be operating from 281 stores representing 79% percent of total selling space and was awaiting further guidance for the stores in Northern Ireland, Wales and Scotland and anticipated openings later in the month.

Primark was currently trading from 112 stores across Europe and the US, representing 34% of its total selling space. The company said that its busiest, or "high density" stores, representing around 10% - 20% of sales, were likely to be negatively impacted by social distancing measures.

"Trading in our re-opened stores has been both reassuring and encouraging, with customer queues outside most stores and, once in store, spending on larger basket sizes," the company said.

ABF said the plans to re-open were ahead of its modelling for the impact of Covid-19 and the new timetable "should deliver a much improved cash flow from trading in the second half of this financial year". However, it warned that it was too early to resume earnings guidance for the remainder of the current financial year.

At the start of store re-openings Primark had £1.5bn of stock on hand, and had also made commitment to suppliers for a further £400m, compared to a typical stockholding of £900m.

"This higher level of stock is due to having taken possession of all finished goods in transit at the time our stores closed and a further commitment to our suppliers to take all products that were planned for handover by 17 April, both finished and in production," the company said.

The company added that it continued to make progress in our discussions with landlords to renegotiate some of the terms in lease arrangements and exceeded previously estimates of a 50% reduction in Primark overheads in April and May.

"Trading in our re-opened stores has been both reassuring and encouraging, with customer queues outside most stores and, once in store, spending on larger basket sizes," ABF said, although it warned that cumulative sales since re-opening, on a like-for-like basis, were down on the same period last year in aggregate.

Elsewhere across the group, ABF said full year grocery operating profit would be ahead of expectations, as stronger sales of branded products sold through retailers more than offsetting weaker sales in food services.

A lower profit at was expected at AB Sugar, it added.

Analysts at Shore capital said the update would be "a relief for ABF shareholders".

"The group has always had a strong financial constitution and this update suggests sound liquidity and strong solvency to us. The easing of Primark's restrictions with trade returning at quite satisfactory initial levels, albeit is too early to really make sensible comment, but also the better than guided cost outcome, shows good and hard work by the team's involved, in our view," the broker said.

"The one key question to us for Primark from this recent experience is whether or not it leads to an adjustment in its online strategy; where partnerships maybe be a worthwhile move, especially if full and partial lockdowns are part of future life; Primark's store only model in this respect has been a strategic challenge."



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