16th Mar 2020 08:33
(Alliance News) - Associated British Foods PLC on Monday said Primark finally succumbed to disruption caused by the Covid-19 outbreak, with store closures set to cost the high street chain GBP190 million in sales over the next month.
Shares in the company were 11% lower at 1,635.50 pence each in London in morning trading.
Stores in France, Spain, Austria and Italy, where governments have imposed lockdowns, have been forced into temporary closure.
"These stores currently generate 30% of Primark's sales. From the date of this announcement, we had expected sales of GBP190 million from these stores over the next four weeks," AB Foods said.
In the UK, which represents 41% of Primark sales, like-for-likes have declined over the last two weeks amid reduced footfall.
The update on Monday comes after AB Foods issued a more promising statement in late-February.
At the time, AB Foods said Primark was yet to experience any short-term pain from the coronavirus outbreak.
AB Foods said it had built inventories before the Chinese new year, when the virus initially spread through Wuhan. I did caution at the time however that supply shortages could be prevalent towards the end of the financial year, if delays to factory production persisted.
AB Foods said on Monday: "Since then, the situation in China has improved, with most factories supplying Primark having re-opened. As a result, supply shortages from that country are now expected to be minimal. However, with developments over the last week in Italy and, more materially, over the weekend in France, Spain and Austria, stores accounting for 20% of Primark's selling space are now closed until the respective governments permit them to re-open.
"We are managing the business appropriately but do not expect to significantly mitigate the effect of the contribution lost from these sales. Given the effect of Covid-19 on Primark's sales, it is too early to provide earnings guidance for the remainder of the current financial year."
Elsewhere, AB Foods said it has not seen "a material impact" in the sugar, grocery, ingredients and agriculture businesses.
The company is expected to publish its interim results on April 21.
By Eric Cunha; [email protected]
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