Fast-fashion retailer Primark has closed all of its UK stores, following closures elsewhere in the world, and has cancelled all future orders due to the spread of the coronavirus.
The retailer, owned by Associated British Foods, said that the response was due to what it was calling a “rapidly changing situation regarding Covid-19” and that all stores would be closed “until further notice”.
As of March 16, Primark stores representing 20 percent of selling space and 30 percent of sales were closed. Since then, and following the closure on Sunday of all stores in the UK, which represented 41 percent of sales, all 376 stores in 12 countries are now closed. This the retailer added represents a loss of some 650 million pounds of net sales per month.
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, explained Associated British Foods in a statement.
In the first instance, Primark has implemented a significant reduction in discretionary spend. The retailer said it is making good progress in also reducing fixed costs following discussions with counterparties, in particular landlords, and welcomes the recently announced government support in the countries in which our stores operate. As a result, it currently estimates being able to recover some 50 percent of total operating costs.
The group added that it has a “strong balance sheet”, substantial cash liquidity with some 800 million pounds of net cash at the half-year, together with a revolving credit facility of some 1.1 billion pounds. Therefore, total available liquidity is 1.9 biilion pounds.
Primark halts current and future production and cancels all new orders
The biggest cost-saving and to help with the management of Primark’s stock will be the halt on all current and future production and purchasing of any material, with the retailer stating that they have “regrettably” informed suppliers that they will not be placing any new orders.
Primark chief executive officer, Paul Marchant, said in a statement: “This situation has been so fast-moving. We could not have foreseen that over the course of a week our stores in every country in which we operate, with the exception of the UK, have had to close.
“We have therefore been left with no option but to take this action. We have large quantities of existing stock in our stores, our depots and in transit, that is paid for and if we do not take this action now, we will be taking delivery of stock that we simply can’t sell. This is unprecedented action for unprecedented and frankly unimaginable times.”
Marchant added: “This is profoundly upsetting for me personally and for all of the team at Primark. We have worked alongside so many of our suppliers for many years and value our relationships enormously. We recognise and are deeply saddened that this will clearly have an effect throughout our entire supply chain. We are in close and regular contact with our suppliers and very much hope that our normal trading relationships can resume as soon as possible.”
Image: courtesy of Primark