Primark profits plunge 90% as AB Foods repays £121m furlough cash

Primark profits plunge 90% as AB Foods repays £121m furlough cash
Shoppers in line at Primark in Birmingham last year. (Image: Jacob King/PA Wires)
// Primark half-year sales decline by 41% to £2.23bn, while profit plunged 90% to £43m
// For AB Foods as a whole, half-year sales down 17% to £6.3bn while profits fell 50% to £319m
// AB Foods will repay £121m in furlough money & pay shareholders despite the slump in sales & profits

Primark parent company AB Foods has said it will repay £121 million in furlough money claimed under government job retention schemes and pay shareholders a dividend despite a slump in sales and profits.

AB Foods said the decision comes despite its stable of Primark stores remaining closed for most of the autumn and winter period, leading to revenues and profits plunging.

Primark sales declined by 41 per cent year-on-year to £2.23 billion in the six-month period ending February 27, equating to a drop of almost £1.5 billion.


Meanwhile, Primark’s adjusted operating profit for the half-year period came in at £43 million, representing a plunge of 90 per cent when compared to the £441 million recorded the year prior.

For AB Foods as a whole, half-year sales were down 17 per cent year-on-year to £6.3 billion while adjusted operating profits fell 50 per cent year-on-year to £319 million.

AB Foods attributed these figures to the majority of Primark’s stores being shut down in November through to February due to various lockdown restrictions across the world.

It also estimated that loss of sales amounted to £1.1 billion in the periods where its stores were closed, and like-for-likes were down 15 per cent when stores were reopened due to Covid-19 restrictions.

In the UK, like-for-like performance was down six per cent in the first half of the year, and down one per cent excluding four major city stores.

However, in the US – where all its remained open throughout the half-year period – like-for-like sales was down 11 per cent, or three per cent if excluding the downtown Boston store.

Primark also introduced a pre-booking system for its stores in The Netherlands, Belgium and Germany so it could continue to trade safely.

In the UK, where its stores and England and Wales reopened on April 12, over half of Primark’s stores broke sales records in the first week thanks to bigger basket sizes and high footfall.

AB Foods chief executive George Weston said the furlough repayments would be made as he was confident Primark’s stores would become cash generative following the easing of lockdown restrictions in England and Wales, where 40 per cent of Primark selling space is located.

“We are excited about welcoming customers back into our stores as the lockdowns ease and are delighted with record sales in England and Wales in the week after reopening on 12 April,” he said.

“With our success in a number of new markets, as wide-ranging as Poland and Florida, we are as convinced as we have ever been in the long-term growth prospects for Primark.”

On the furlough scheme, Weston said AB Foods claimed £98 million during the previous financial year to support Primark’s 65,000 workforce.

“A further £79 million was claimed in the six months to February 27 and up until today the amount is now £121 million,” AB Foods said.

Chairman Michael McLintock said: “Although uncertainty remains, a large proportion of the UK adult population has now been vaccinated and last week we saw the successful reopening of Primark’s English and Welsh stores which represent some 40 per cent of our total retail selling space.

“On the assumption that our English and Welsh stores remain open, Primark will return to cash generation.

“Accordingly, we do not plan to make any further claims from government job retention schemes for which we would be eligible from this date, and we intend to repay the £121 million referred to above.

“This includes the repayment of £72 million to the UK Government.”

A dividend of 6.2p a share was declared, worth £49 million, having scrapped any dividend payments last year.

AB Foods said it expected to be trading from 68 per cent of selling space by the end of April.

with PA Wires

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