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Primark sales lower than expected as pingdemic bites

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LONDON, UNITED KINGDOM - 2021/08/31: A woman wearing a mask walks past Primark store near Marble Arch in London. (Photo by Belinda Jiao/SOPA Images/LightRocket via Getty Images)
For the fourth quarter as a whole, like-for-like sales are expected to be 17% lower than the same period before the pandemic. Photo: Belinda Jiao/SOPA Images/LightRocket via Getty

Associated British Foods (ABF.L), owner of Primark, has revealed that sales at the retail chain came in “lower than expected” due to the ongoing spread of coronavirus in the UK.

The business said it was hit by the “pingdemic” in which thousands of Brits were told by the NHS app to self-isolate after coming into close contact with a positive COVID-19 case.

Like-for-like sales in the third quarter were up 3%, compared to two years ago, due to strong trading in the UK and European regions where stores had reopened.

However, for the fourth quarter as a whole, like-for-like sales are expected to be 17% lower than the same period before the pandemic.

“Our sales in the fourth quarter were affected by the impact on footfall as a result of the changes in public health measures in our major markets to control the spread of COVID-19 and its delta variant in particular,” the company said.

Read more: UK sets out £650bn infrastructure spend as supply chain crunch continues

It added that the business had seen “a significant improvement in trading” as the period progressed, from a weekly decline in like-for-like sales of 24% at the start of the period to a decline of 10% in recent weeks.

“The “pingdemic” came at a bad time for Primark, throttling some of the recovery it had been seeing and holding back sales in the fourth quarter,” Richard Hunter, head of markets at Interactive Investor, said.

“However, when access to the stores was unfettered, the picture was extremely bright. A combination of pent-up demand and very high basket sizes propelled sales and, since the easing of further restrictions, sales of the likes of the back to school ranges started strongly.”

Similar to several major British retailers, Primark has been hit with supply chain issues. It admitted that it is experiencing delays to the stock of autumn/winter season inventory due to port and container freight disruption.

ABF shares fell as much as 4% on Monday. Chart: Yahoo Finance
ABF shares fell as much as 4% on Monday. Chart: Yahoo Finance

Primark also reconfirmed its aim to focus on its new sustainability strategy, in an attempt to reduce its impact on the environment.

The discount retailer is now expected to post sales of around £3.4bn ($4.7bn) for the half-year to 18 September. ABF’s cash management has granted Primark a net cash position of £1.9bn, up from £1.5bn at the end of the third quarter and from the £1.6bn total it secured last year.

The group, which also owns Twinings and Ovaltine, raised its profit outlook for the full year as Primark benefited from lower store labour and operating costs in the latest quarter.

ABF has also seen its AB World Foods and Silver Spoon sugar businesses perform well, with sales significantly ahead of pre-pandemic levels.

Read more: UK’s ‘pingdemic’ hits petrol stations

Shares in ABF fell around 4% in London on Monday.

“As Primark powers on, swathes of ABF’s food business has proved equally resilient with Sugar expected to also deliver a greater improvement in adjusted operating profit. The trend for lockdown baking seems to have endured with the ingredients division seeing an acceleration of demand,” Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said.

Watch: Primark suffers pingdemic sales slump and supply chain delays

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