Sales Surge as Stores Reopen, but UK and European Sales Lag
- Primark’s trading exceeds expectations post-lockdown
- Cumulative sales since reopening expected to be £2bn
- Adjusted operating profit at top end of £300m to £350m range
- Total customer spend on clothing impacted by Covid-19, but recovery accelerating
- Increased footfall and higher basket size since reopening
- UK sales 12% lower on a like-for-like basis (excluding large stores: 5%)
- European sales 17% lower on a like-for-like basis, US sales 9% lower
- Exceptional charge of £284m recognised against inventory on hand and yet to be delivered
- Retailer sold in-store stock and significant proportion not yet delivered
Associated British Foods (ABF) has reported that Primark’s trading in the fourth quarter has exceeded expectations ahead of its full-year results announcement on November 3. Primark stores reopened in May, June, and July and have since traded strongly, with cumulative sales expected to be £2 billion since reopening. The adjusted operating profit is now anticipated to be at least at the top end of the previously advised £300m to £350m range. Although total customer spend on clothing, footwear, and accessories was impacted by Covid-19, the rate of recovery has accelerated since store reopenings. Since reopening, rising footfall led to increased transactions, with initially significantly higher basket size compared to last year due to pent-up demand. ABF noted that while this outperformance has reduced in recent weeks, it remains higher than the previous year’s levels. In the UK, sales since reopening are expected to be 12% lower on a like-for-like basis (excluding large stores: 5%). European sales are anticipated to be 17% lower on a like-for-like basis, while US sales are expected to be 9% lower. ABF also recognised an exceptional charge of £284m against inventory on hand and yet to be delivered. The earlier than expected reopening and stronger trading over the summer allowed the retailer to sell in-store stock as well as a significant proportion not yet delivered. ABF stated, ‘The cash generated by the sale of this stock on hand is the major contributor to our better net cash balance at the year-end. We will review both our stocks on hand and our commitments at the year-end and expect this to result in a significant reduction in the exceptional charge.’
Factuality Level: 8
Factuality Justification: The article provides accurate and objective information about Primark’s trading performance after reopening, including specific sales figures and comparisons to previous years. It also includes relevant details about inventory management and cash balance. However, it lacks personal opinions or sensationalism.
Noise Level: 3
Noise Justification: The article provides relevant information about Primark’s trading performance after reopening during the pandemic, but it lacks in-depth analysis or exploration of long-term trends and consequences of decisions made by the company. It also does not offer actionable insights for readers.
Financial Relevance: Yes
Financial Markets Impacted: Primark’s strong trading performance impacts its parent company Associated British Foods, affecting its full-year results and stock inventory.
Financial Rating Justification: The article discusses financial metrics such as sales, operating profit, and inventory management for Primark, which is a subsidiary of Associated British Foods. It also mentions the impact on financial markets through the company’s performance and adjustments to their commitments.
Presence Of Extreme Event: No
Nature Of Extreme Event: No
Impact Rating Of The Extreme Event: No
Extreme Rating Justification: No extreme event mentioned in the article
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