Primark owner Associated British Foods on Monday issued a surprise update, just a day before its annual results are due, as it faces the prospect of more store shutdowns in the key markets in which it operates. As of Monday, all Primark stores in the Republic of Ireland, France, Belgium, Wales, Catalonia in Spain, and Slovenia are temporarily closed, which represents 19% of its total retail selling space.
And the UK government’s weekend announcement that all non-essential stores in England would have to close for four weeks from this Thursday means that 57% of its total selling space will be temporarily shut from November 5. The company is back to the situation it saw during the lockdowns earlier this year when it was missing out on hundreds of millions of pounds a month in sales. It said that lost sales for the shops now closed or about to close would add up to around £375 million in the latest lockdown. Trading hours are also restricted in a number of other markets, which piles on more problems and “uncertainty about further temporary store closures in the short-term remains”.
It's a huge blow for Primark which was losing sales of more than £600 million a month earlier this year as it has no online operation to switch to in the event of enforced closures.
But the company had seemed to be one of the retailers that were bouncing back the best once its shops reopened and were reasonably upbeat ahead of what should be its best season.
Now, as well as the lost revenues, it's also faced with holding a huge amount of surplus stock. The company said it’s “implementing the operational plans developed to manage the consequences of these closures and appropriate action will be taken to reduce operating costs”. But it added that “all orders placed with our suppliers will be honored”.
We wait to hear from other major fashion retailers what their plans are as far as AW20 and Christmas orders are concerned. When lockdowns were introduced in the spring, many of them honored orders placed, but others canceled those that hadn't yet been delivered.
This hurt businesses further down the supply chain with Bangladesh in particular being called out as a manufacturing country where there was a great deal of hardship as a result of lost orders.
And landlords suffered too as retailers unable to trade from their physical shops refused to pay rent on them in many cases. Landlords have been struggling to collect rents since the reopening and could be faced with another situation in which their tenants withhold part of the money owed due to this latest lockdown.