Pandemic wipes out £540m of Primark sales as Boohoo charges ahead
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Revenue at discount fashion chain Primark fell 30 per cent over the past quarter, as online rival Boohoo reported soaring sales, in a sign of the sharply diverging fortunes among UK retailers.
Primark, which does not sell online, said Covid restrictions across Europe had shut three-quarters of its stores, pushing customers online and wiping out an estimated £540m in turnover during the 16 weeks to January 2. Even in stores that remained open, sales fell 14 per cent.
If the shops remained closed until February — the end of Primark’s financial half-year — the loss of sales would be £1.05bn, up from an earlier estimate of £650m.
Its performance was in stark contrast to online-only Boohoo, which on Thursday raised its guidance for revenue growth as more customers shopped from home.
Boohoo, which has repeatedly upgraded forecasts during the pandemic, said it expected group revenue to grow by 36 to 38 per cent in the full year, up from previous guidance of 28 to 32 per cent.
Its sales in the four months to December rose to £661m, up 40 per cent on the same period last year. Analysts were expecting a 29 per cent increase.
Primark expected to “broadly break even” in the first half, compared with an adjusted operating profit of £441m for the same period in the past financial year.
In a worst-case scenario of all stores being closed down until Easter, there would be a further reduction in full-year profit of £300m. Currently, stores in the US, France, Belgium, Italy and some parts of Spain are still trading.
Despite the hit to performance, Primark reiterated that it had no plans to start selling online. “Make no mistake, I hate losing £1bn of sales,” said John Bason, finance director at Primark’s parent company Associated British Foods.
“But we are looking through this. We’ve shown time and again that we are relevant . . . come the summer we are confident that people will want to go on holidays, go to parties and go shopping at Primark.”
Not everyone is convinced. Adam Cochrane, analyst at Citi, said in a note to clients that many consumers were likely to stick with online shopping habits formed during the pandemic “and Primark has to consider whether ongoing footfall will be structurally lower”.
There are other examples of diverging performances between purely online and predominantly in-store retailers. On Thursday, Card Factory warned that full-year sales would be down by a third, resulting in a £10m loss.
Yet earlier this week, online rival Moonpig said sales had more than doubled in the first six months. Moonpig expected to float soon, with a valuation of more than £1bn; Card Factory’s market value is £129m.
AB Foods does at least have a stable of other businesses — trading at its grocery, sugar, agriculture and ingredients divisions was ahead of expectations — and £500m of net cash to help it ride out the problems affecting its main profit generator.
But those that have been able to quickly expand online sales to mitigate store closures have fared better. Dunelm, a homewares retailer, said on Thursday that sales were up 11.8 per cent in the 13 weeks to December 26 despite store closures during that period. Online sales have doubled since last year.
Cycles and car parts retailer Halfords reported retail sales growth of 7.7 per cent in the 13 weeks to January 1. Its stores have remained open during the pandemic, but it was also helped by a 76 per cent rise in online sales during the most recent period.
Even Boohoo has not been immune from Covid-19’s consequences; it said margins would be flat because of higher charges for air freight and shipping and the rising cost of reaching new customers.