Primark owner Associated British Foods has warned of a hit from lost retail sales of more than £1 billion if coronavirus lockdowns force its stores to stay closed until the end of February.
The budget fashion chain said 305 of its 389 shops around the world are currently shut, which is expected to cost it £1.05 billion in lost sales – up from the £650 million hit forecast at the end of December.
AB Foods – which has 190 shops in the UK – said it now expects to see half-year underlying earnings wiped out, with the group forecasting to be “broadly break-even” against profits of £441 million a year earlier.
But it said it could be facing a £1.85 billion sales impact if its entire store estate has to close and remain shut until the end of March, knocking profits by a further £300 million.
Primark has already seen £540 million in lost retail sales from store closures due to coronavirus restrictions in its key Christmas quarter, with sales slumping 30% in the 16 weeks to January 2.
The group saw trade badly impacted by the November lockdown in England and restrictions across Europe, with no online business to fall back on.
Current shop closures account for around 76% of its retail selling space.
The group said it has been able to offset some of the trading impact with overhead costs cut by 25% due to store closures.
AB Foods said: “The impact of store closures on Primark’s performance is significant.
“We now expect full year sales and adjusted operating profit for Primark to be somewhat lower than last year.”
The group said trading was strong while stores were open, with like-for-like sales declines running at 14% in the 16-week period.
Stores at retail parks accessible by car lifted on a year earlier, but high street and shopping centre sites were badly impacted by the pandemic.
Despite the woes, it opened another five shops over its festive quarter and pledged to “continue to expand retail selling space” with another 15 new sites planned across the UK, Europe and the US for the year ahead.
Finance director John Bason told the PA news agency the group would not turn its back on the high street, despite the shift away from town centre shopping amid the pandemic.
He said: “There probably will be more home working but a lot of people will want to come back to office working, tourism will come back… but it will take time.
“When we’re through all this, people will want to go on holiday, they’ll want to have a party and they’ll want to shop at Primark.”
The group has so far avoided hefty job cuts in the crisis and Mr Bason said there were no plans for large-scale redundancies.
Better-than-expected trading elsewhere in the group is helping offset the retail trading difficulties, with 16-week sales growth of 7% for the groceries business, 6% for its sugar arm, 10% for agriculture and 3% for the ingredients division.
This saw overall group revenues fall 13% over the period.