AB Foods prioritises food production; Primark sales down over coronavirus

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primark owner Associated British Foods announces 2018 results

Associated British Foods has been forced to close 74 Primark fashion stores in continental Europe due to government measures to combat coronavirus, while sales have fallen in those still open, it said on Monday.

However, it has not seen a material impact in its sugar, grocery, ingredients and agriculture businesses, from the outbreak.

“We’re prioritising the production of food,” AB Foods’ finance director John Bason told Reuters.

“It shouldn’t be lost in this that whilst we’re talking about financial guidance, it’s our responsibility to keep food production going. All of our food factories are doing that,” he said.

AB Foods’ brands include Silver Spoon sugar, Kingsmill bread, Twinings tea, Ovaltine and Jordans cereal.

The group also said it could not provide earnings guidance for the full 2020-21 year due to the uncertain outlook.

“There is no doubt that all clothing retailers are seeing lower demand…Peoples’ immediate priorities are in other areas,” Bason said.

The group said it closed 20 percent of Primark’s selling space in continental Europe which the World Health Organisation says is now the epicentre of the coronavirus outbreak.

Primark generates about half of the group’s revenue and profit.

Primark stores in Italy, France, Spain and Austria were now closed until their respective governments permit them to re-open. AB Foods said with these stores generating 30 percent of Primark’s sales, the group had expected sales from them of £190 million over the next month.

The group said the remainder of the Primark estate, including Britain which represents 41 percent of sales, has seen like-for-like sales declines over the last two weeks which accelerated over the past few days due to reduced footfall.

The group does not expect to be able to significantly mitigate the lost Primark sales.

In February, AB Foods had highlighted the risk to supply of goods from its suppliers in China.

It said that since then, the situation in China has improved, with most factories supplying Primark having re-opened. As a result, supply shortages from China are now expected to be minimal.

The group also said it has a strong balance sheet, substantial cash liquidity with some £800 million of net cash at the half year and significant undrawn bank facilities.