Primark sees strong sales at global stores, English shops to open on 15 June

By

Sandra Halliday

Published
Jun 1, 2020

Reopening is hugely important for every physical retailer, but it's even more so for Primark, which has admitted it's been losing £650 million in sales a month due to lockdowns as it hasn't got an e-commerce channel to fall back on.

But on Monday, it said its shops in England will reopen from June 15. And it added that early trading indicators from recently reopened stores elsewhere “have been both reassuring and encouraging”.

Consumers are buying kidswear, leisure and nightwear, along with summer products such as shorts and T-shirts, reflecting good weather in the markets that have reopened.

Primark stores globally started closing from 11 March, leading to that £650 million-a-month lost sales figure. The company cut costs to counteract these losses and also cancelled some forward orders but the key contributors to its reduction in overheads were the government employment retention schemes across Europe. 

The company has been able to reopen 112 stores recently and this seems to have gone well. So with social distancing protocols and hygiene measures in place, it’s now planning to open all of its English stores on the same day.

Unlike some other retailers that are taking a phased approach, it feels confident that it can handle this as it's learnt a lot from its European reopenings, although it’s waiting for further guidance for the stores in Northern Ireland, Wales and Scotland and anticipates openings in late June.

The 112 international stores already open account for 34% of its total selling space. When the English shops open, that will mean a total of 281 stores operating globally, representing 79% of total selling space.

By 15 June, it will also have opened three new stores that were originally planned for earlier debuts. They include Mons in Belgium and Gropius in Berlin, Germany that have already opened, while a store in Manchester’s Trafford Centre in the UK will open on 15 June. 

EXCESS STOCK

But where does it stand on all the excess stock it has built up? At the start of the reopening of stores, Primark had £1.5 billion of stock on hand, and had also made commitments to its suppliers for a further £0.4 billion. This compares to a typical stockholding of £0.9 billion. 

It said it’s now “placing substantial orders for [autumn/winter] seasonal stock with our suppliers.

The excess stock on hand mainly comprises “everyday continuity, non-fashion and non-seasonal, ranges and some excess spring/summer stock”. We’re told the nature of the continuity stock “will allow it to be sold in the normal course of business, albeit at a later date and without the need for special discounting beyond our normal practices”. 

PENT-UP DEMAND

Overall, the firm seems generally confident and trading in reopened stores so far seems to have boosted its optimism with plenty of pent-up demand. It said that trading “has been both reassuring and encouraging, with customer queues outside most stores and, once in-store, spending on larger basket sizes”.

However, it accepts that the trading results since reopening “were delivered over a very short period, will have been influenced by a number of specific factors, and may not be indicative of a long-term pattern”. Cumulative sales since reopening, on a like-for-like basis, “were down on the same period last year in aggregate”. 

But for a number of stores, sales were ahead of last year. “A good number” of its regional stores are performing well and only four stores had initial sales below 50% of last year. This included Damrak in the centre of Amsterdam and its store in Alexanderplatz, Berlin. Both of these stores are in the centre of big cities and are suffering from the current absence of tourism and much lower commuter footfall.

It’s no surprise that cost-cutting initiatives are continuing. In the UK, for instance, the company said it continues “to make progress in our discussions with landlords to renegotiate some of the terms in our lease arrangements. In April and May, we exceeded our previously advised estimate of a 50% reduction in Primark overheads”.