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Lockdowns Cost Primark Parent $573 Million

Although month-long closures at Primark stores took a toll on its top line to the tune of an estimated 430 million pounds ($573 million), parent company Associated British Foods (ABF) foresees a positive 2021 on the horizon. ABF expects Primark sales and profit to be higher in the upcoming 2021 financial year compared to 2020, which ended Sept. 12, with plans to expand retail selling space.

The loss was larger than the 375-million-pound (approximately $500 million) hit ABF projected at the start of November.

In 2020, total group revenues fell 12 percent to 13.9 billion pounds ($18.2 billion) for the year ended Sept. 12, with sales clearly impacted by the Covid-19 pandemic.

The look forward to 2021 comes as ABF is reportedly considering a bid for a number of Arcadia Group’s fashion retail brands, according to a report from The Sunday Times. If true, ABF would be among a long list of potential suitors for the apparel company’s assets, including Frasers Group, Boohoo, Marks & Spencer, Next, River Island and American brand management firm Authentic Brands.

Arcadia Group Limited, one of the staples of U.K. fashion retail and operator of brands such as Topshop, Dorothy Perkins and Miss Selfridge, fell into administration in November. Administrators at Deloitte are looking for bids of up to 200 million pounds for Topshop alone, according to The Guardian.

Primark’s stores in the major markets of England, Ireland, France and Belgium reopened to start December after they were hit with a second string of nationwide nonessential lockdowns amid the rise in Covid-19 cases. Sales in the days after reopening have been “very strong, reflecting the excitement and appeal of the Primark offering,” ABF chairman Michael McLintock said at the company’s annual meeting on Dec. 4.

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Operating hours in all 153 of Primark’s English branches were extended until at least 8 p.m. on weekdays until Dec. 23. The retailer already opened 11 of its England stores for 24 hours when they were allowed to reopen.

“We have extended the opening hours during this festive season in most of our stores in the Republic of Ireland and England to cater for the anticipated higher customer demand and to help ensure a safer environment by spreading shopping hours over a longer period,” McLintock said.

As of Dec. 4, 34 stores across ABF’s markets remain temporarily closed, including all stores in Northern Ireland and Austria. This represented 7 percent of the company’s total retail selling space compared to 62 percent when the highest number of stores were closed in November.

On a positive note, the operating costs of the shuttered Primark locations were reduced by some 25 percent during this period of closure.

All orders placed with suppliers have been honored, McLintock confirmed. In a “small number” of markets, trading hours and store occupancy levels continue to be restricted and uncertainty about further temporary store closures in the short-term remains.

Since the start of this financial year, Primark has opened new stores at U.S. shopping centers including the American Dream megamall and entertainment complex in New Jersey and Sawgrass Mills in Florida. The retailer has also opened three stores internationally in the past two months, including one in Rome, and two more in Spain in Barcelona and León.

These store openings bring Primark’s total estate to 389 stores and 16.5 million square feet of retail selling space.

U.K. footfall picks up ahead of Christmas

ABF’s confidence in Primark comes as store foot traffic continues to jump throughout the U.K., with footfall increasing 19.5 percent week over week in the seven-day period of Dec. 6 to Dec. 13, with rises of 26.3 percent in shopping centers and 21.1 percent at high-street retail locations.

The weekly traffic increase stands in sharp contrast with 2019 when footfall declined by 0.9 percent following rises in the previous two weeks (1.3 percent in the previous week and 7.6 percent in the week of Black Friday). This year, in-store traffic in the U.K. improved 8 percent during the week of Black Friday even in the wake of the lockdowns.

Footfall rose in all periods across the entire day, although during daytime business hours, the increase was nearly one-quarter greater than post-6 p.m. The jump in traffic was 20.4 percent during the daytime hours between 9 a.m. and 6 p.m., as opposed to 16.9 percent from 6 p.m. to midnight. But either way, this is a positive sign for retailers as it indicates that shoppers are using the extended hours to visit stores.

Retail parks, which are the equivalent of larger non-mall shopping centers in the U.S., saw the smallest week-over-week traffic growth at 9 percent, but they have had by far the smallest traffic drop of physical locations compared to last year. Much of the success comes from the fact that retail parks often include food stores that are still heavily trafficked.

These parks have only experienced an 8.6 percent dip year-over-year from Dec. 6 to Dec. 12, compared to the 38.1 percent footfall decrease in the high street locations and a 33.2 percent decline in shopping center traffic. Overall, brick-and-mortar footfall throughout the U.K. is 29.9 percent lower than last year across all destinations.

During the annual meeting, McLintock assured that its businesses have completed “all practical preparations” as the U.K. preps to exit the European Union this month, noting that “contingency plans are in place should our businesses experience some disruption at that time.”