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Primark Parent Says New Lockdowns Will Balloon Losses

Primark parent Associated British Foods says new coronavirus lockdowns effective since New Year’s Day will drive its estimated losses even higher than originally anticipated.

Beginning on Jan. 1, 253 Primark stores temporarily closed in the U.K. and Republic of Ireland, representing 64 percent of its total retail selling space. On Dec. 4, concurrent with its annual meeting, the Primark owner had previously forecasted sales losses of 430 million pounds ($586.2 million) from earlier temporary lockdowns. The new estimate is now a forecast of “some 650 million pounds ($886.1 million),” up $299.9 million based on current lockdown measures, the length of which vary according to market.

Associated British Foods chairman Michael McLintock noted last month that “[a]ll orders placed with our suppliers have been honored.”

Primark’s parent said it will provide a scheduled business update on Jan. 14.

On Wednesday, British Prime Minister Boris Johnson added more sections of England to the country’s toughest Tier 4 restrictions. Now about 75 percent of England is under lockdown to battle the new, more contagious strain of Covid-19 that as of Sunday has been identified in 33 countries, multiple media outlets reported. The U.K’s new mandate instructs all nonessential retailers to temporarily close and limits who, where and how many people can meet.

Previously, temporary emergency lockdowns in places like Wales were supposed to last just two weeks before the new highly transmissible Covid-19 strain emerged.

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The Republic of Ireland, which shares a border with Northern Ireland, a part of the U.K., last week moved to Level Five restrictions closing non-essential retailers in a bid to stem the rising infection rates. Irish Prime Minister Michéal Martin said on Dec. 30 that the severe restrictions would be in place for at least a month. The country on Christmas Eve had moved to more stricter restrictions closing restaurants and salons.

U.K. retail data firm Springboard said on Monday that foot traffic across U.K. retail destinations fell 23.2 percent last week from the week before, and were down 55.7 percent from the same week in 2019. Foot traffic in Tier 4 locations were down 72.2 percent from year-ago figures.

In other parts of the U.K., foot traffic in Scotland and Northern Ireland also fell as the two nations entered their own lockdowns. Foot traffic dropped 58 percent from the week before in Scotland and was down 74.4 percent in Northern Ireland for the same period. In Wales, the decline from the week before was only 8.6 percent, largely because it saw a far larger decline of 59.7 percent in the prior week as lockdowns took hold.

“The end of the festive trading period and tightened government restrictions unsurprisingly saw footfall in UK retail destinations drop significantly at the end of 2020. Moving into a new year, with the extension of Tier 4 across virtually all of England and lockdowns in place in the devolved nations, retailers are unlikely to see any respite until restrictions are eased in the coming weeks or months,” Diane Wehrle, Springboard’s insights director, said. “We know from our experience of retail reopening in June 2020 that until the widespread roll out of the vaccine, retail footfall will remain significantly below the pre Covid level.”