Primark sales in focus amid hopes of summer stock clear-out

Investors will find out this week if high street phenomenon Primark remains on track with its post-lockdown recovery as it looks to shift unsold stock.

A trading update from parent company Associated British Foods (ABF) will be eagerly awaited by analysts who believe that the group, which has 20 Scottish stores, remains in “pretty good shape”.

It comes after a particularly tough lockdown for the discount fashion business, which does not sell its wares online.

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In April, ABF revealed that sales were down 17 per cent to £6.3 billion and adjusted operating profits fell 50 per cent to £319 million in the six months to February 27.

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
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

Laura Hoy, an equity analyst at financial services group Hargreaves Lansdown, said: “Primark parent Associated British Foods is on track for a year-over-year profit decline, but all things considered, the retailer is in pretty good shape.

“Lockdowns hit revenue hard as Primark’s lack of online presence hurt sales. But the upcoming quarterly results should show the start of a recovery for ABF.

“One of Primark’s biggest strengths throughout the crisis has been inventory management, which has kept the chain from heavy discounting like many of its peers. Instead, the group has mixed last year’s inventory with new lines to clear out unsold items.

“Demand was strong initially as its stores reopened, and we’ll be looking for evidence that the group has been able to offload last year’s spring and summer lines as shoppers return.”

She added: “If pent-up demand was as strong as management was expecting, we should see strong margins.”

Conglomerate ABF also has grocery, sugar, agriculture and ingredients businesses, which have had thier own challenges to contend with.

Hoy noted: “Sales in the group’s grocery division will be up against tough comparisons after the boom last year. Together with rising US vegetable oil costs, profits in the division are unlikely to grow.”

In April, ABF said it would be repaying £121m in furlough money claimed under government job retention schemes.

Meanwhile, the group declared a dividend of 6.2p a share for its investors, worth some £49m, having scrapped any dividend payments last year.

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