Primark takes 284 million pound hit from excess stock

Primark parent company AB Foods has shed more light on the impact the Covid-19 pandemic has had on the fast-fashion retailer, revealing that it has taken a 284 million pound hit from stock it can no longer sell due to store closures.

For the 24 weeks to February 29, Primark’s revenue increased 4 percent to 3.71 billion pounds, but the 376-strong chain had to close all its stores on 22 March as part of the government-enforced lockdown.

Sales at Primark have gone from 650 million pounds a month to zero.

Unlike many fashion retailers with online presences, Primark only sells in physical stores, making the impact of store closure that much more severe. The company said the timing of the reopening of the stores remains uncertain and will likely be a “complex” process.

Slow and steady approach to store reopenings

“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,” AB Foods CEO George Weston said in a statement.

“One of the world's great clothing retailers is entirely shut. We have paid for in full, and taken delivery of, very large amounts of completed stock which we can't sell for now and we have established a fund that will ensure everyone in a vulnerable country who worked on a Primark garment, whether completed or not, is paid for that work. And we are supporting suppliers with commitments to buy garments that are as yet unfinished.”

Primark currently has 68,000 employees receiving furlough payments from governments across Europe.

Weston said: “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.”

AB Foods has 801 million pounds in cash and has drawn down a revolving credit facility of 1.08 billion pounds.

Photo credit: FashionUnited