Primark assures on Christmas stock levels but Omicron variant casts a shadow

Fashion chain Primark has been trading better than expected over the last three months despite supply chain challenges.

Parent company AB Foods said it had managed to use its position as a major customer for its suppliers to overcome some of the squeezes on global supply chains, so it has most of the products it needs for Christmas.

Releasing a trading update to coincide with its annual shareholder meeting, the group told investors: “Primark trading year-to-date has been ahead of expectations with improved like-for-like sales compared to the fourth quarter of our last financial year.

“We are managing disruption in our supply chain by prioritising products most in demand with the support of our logistics providers for whom we are a very important customer. We have stock cover on the vast majority of lines for the important Christmas trading period.”

People queue outside the flagship Scottish Primark store on Princes Street in Edinburgh after it reopened following the initial spring 2020 lockdown. Picture: Jane Barlow/PA Wire

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Recent concerns over the spread of the new Covid variant and its possible health impacts have however brought some consequences.

Primark stores in the Netherlands have been hit by restrictions in trading hours, in Germany customers need vaccine passes, while its five shops in Austria have all closed on a temporary basis.

But in the months ahead things are unlikely to get worse than they were at the same time last year, when most of the chain's shops were closed.

Between December and April sales are expected to be “significantly better” than in the same period a year earlier, AB Foods told shareholders.

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The group also has several other businesses, including grocery, sugar, ingredients and agriculture businesses.

These have all traded in line with expectations since the start of the financial year in September.

AB Foods noted: “Trading to date in our new financial year across grocery, sugar, ingredients and agriculture has been in line with expectations.

“We are experiencing the impact of widely reported port congestion and road freight limitations and our businesses have been working hard to overcome these difficulties.

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“We have seen an escalation in the cost of energy, logistics and commodities and we have been implementing plans to offset these through operational cost savings and, where necessary, the implementation of price increases.”

It added: “Taking these factors into account, we continue to expect significant progress, at both the half and full year, in adjusted operating profit and adjusted earnings per share for the group.”

Analysts at brokerage Shore Capital noted: “The encouraging AGM statement follows on from a welcome set of preliminary results when the group also spoke to its capital allocation framework.

“ABF is a very good business, few will deny that, with strong values and a truly long-term approach. Its equity has not always been the flavour of the month in recent times, understandably hit in some respects around Primark uncertainty and its relative lack of online capability.

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“Whilst so, Primark remains a powerful and great business that has growth ahead, whilst its digital journey is now more demonstrably moving in the right direction.

“More broadly, perhaps Allied Bakeries aside, the balance of ABF Group is also quite simply good businesses.”

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