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Primark Sees No Short-Term Coronavirus Impact—But Factory Delays Spell Trouble

Apparel retailer Primark said Tuesday that it doesn’t foresee any short-term issues connected to the coronavirus outbreak in China, although delays to factory production could impact the fulfillment of current orders.

Primark, owned by Associated British Foods plc, has a number of merchandise categories–including apparel–that are manufactured in China.

“Primark sources a broad assortment of its product from China. We typically build inventories in advance of Chinese New Year and, as a consequence, are well stocked with [goods] for several months and do not expect any short-term impact,” the company said Tuesday, adding that it’s working with China suppliers to determine the factory and supply chain impact and their ability to fulfill current orders.

“If delays to factory production are prolonged, the risk of supply shortages on some lines later this financial year increases. We are assessing mitigating strategies, including a step up in production from existing suppliers in other regions,” the company said.

Primark’s possible impact from the coronavirus, now officially identified as COVID-19, came its parent company’s update on the first-half outlook for the 24-week period ending Feb. 29, 2020. Associated British Foods is expected to disclose financial results for the half on April 21, 2020.

“For the half year, we expect sales growth for the group and expect adjusted operating profit to be ahead of last year on both a lease-adjusted and reported basis,” Associated said, adding that it expects strong growth in adjusted operating profit in the second half, driven in part by profit growth for Primark.

Sales at Primark are expected to be 4.2 percent ahead of last year in the first half at constant currency and 2.5 percent ahead at actual exchange rates, driven by “increased retail selling space and level like-for-like sales. With the expected decline in margin, operating profit is expected to be marginally down on last year at constant currency and on a lease-adjusted basis,” Associated said.

Sales in the U.K. are projected to rise 3 percent versus last year, as market share in apparel, footwear and accessories rose, while sales in the Eurozone are expected to rise 5.3 percent at constant currency following strong sales growth in France, Belgium and Italy. U.S. sales continues to perform “strongly, delivering like-for-like sales growth,” Associated said.