Primark sales take hit from 'pingdemic' amid winter stock delay woes

Sales at discount fashion chain Primark have been "lower than expected" in recent months after footfall was impacted by the pingdemic while the firm has also faced supply chain issues.

Monday, 13th September 2021, 9:15 am
Updated Monday, 13th September 2021, 9:15 am

However, parent group Associated British Foods (ABF) also upgraded its profit guidance for the past year as Primark benefited from lower store labour and operating costs in the latest quarter.

ABF told investors that its profits for the past financial year are set to surpass figures for the previous one, after strong profit performances by Primark and its grocery business.

The firm was also boosted by "much improved" profits at its sugar operation.

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People queue outside the flagship Scottish Primark store on Princes Street in Edinburgh after it reopened following the initial spring 2020 lockdown. Picture: Jane Barlow/PA Wire

Primark is expected to reveal sales worth some £3.4 billion for the half-year to September after momentum was dented slightly in the summer.

The retail chain saw "very strong trading" in the third quarter after reopening stores but was hit by a change in consumer sentiment as more people were "pinged" over potential Covid cases.

ABF noted: "In the UK our sales were affected by the rapid and significant increase in late June and early July in the number of people required to self-isolate following contact tracing alerts - the 'pingdemic'.

"Data shows that high street footfall was impacted by the caution displayed by many consumers at that time.

"The self-isolation rules were then eased in early August. Correspondingly, like-for-like sales showed a consistent improvement through the period from a decline of 24 per cent in the first four weeks of the quarter to a decline of 8 per cent in the last four weeks."

For the fourth quarter as a whole, the company expects to see a 17 per cent decline in sales compared with the same period from 2019.

It added that it is currently experiencing "some delays" to the stock of autumn/winter season inventory due to "port and container freight disruption".

Covid-19 restrictions have also "held back" the company's progress on developing its pipeline of new stores, with difficulties in assessing and evaluating new sites and negotiating with potential landlords.

Susannah Streeter, senior investment and markets analyst at financial services group Hargreaves Lansdown, said: “For now Primark is still firing on all cylinders and its robust operating model meant even the pingdemic, which dented summer sales, didn’t prove the bump in the road to veer off course.

“The company though is not immune to supply chain issues, with delays to the handover of autumn winter inventory caused by port disruptions. That’s led to concerns trading for the upcoming year might not be as smooth.”

Mark Crouch, analyst at investment platform eToro, noted: “Primark owner Associated British Foods has delivered a positive trading update, but as we’re seeing with many updates right now, is warning of constraints that may hinder its future growth and possible supply issues in the run up to Christmas.”

Meanwhile, ABF's grocery revenues are expected to be ahead of last year, receiving a boost from growth in its Twinings and Ovaltine drinks businesses.

It added that its AB World Foods, Silver Spoon and Westmill businesses saw sales significantly ahead of pre-pandemic levels.

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