Primark loses £650m a month from closed stores, but says it has enough cash
Brief news that Primark was closing all of its UK and Ireland stores as of Sunday evening was fleshed out further on Monday as the company delivered a stock market update in addition to the update it had issued only seven days earlier.
It said its UK shops represent 41% of its annual sales and are now all closed with all 376 of its stores in 12 countries also shut until further notice. This represents a loss of around £650 million a month in net sales.
The company said that “a variety of work streams have been established to mitigate the effect of the contribution lost from these sales and all expenditure is being reviewed. In the first instance we have implemented a significant reduction in discretionary spend”.
The company, which doesn't trade online, has massive fixed costs as far as its giant shops are concerned and it added that it's “making good progress in also reducing [such] costs following discussions with counter-parties, in particular landlords, and welcome the recently announced government support in the countries in which our stores operate”.
As a result, it's currently estimating being able to recover a hefty 50% of its total operating costs. The retailer also confirmed that it has informed its suppliers it will stop placing new orders.
But it stressed that it has “a strong balance sheet, substantial cash liquidity with some £800 million of net cash at the half year, together with a revolving credit facility of some £1.1 billion. Therefore, total available liquidity is £1.9bn”.
And the parent company of Primark, Associated British Foods, also said that because of its highly diversified business, it has seen areas of strength in other business streams. “Importantly, we reiterate that in aggregate, we have not seen a material impact in our sugar, grocery, ingredients and agriculture businesses,” it added.
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