Fast fashion retailer Primark has said that store closures caused by European lockdowns will mean that it will have missed out on over $1.4 billion in revenues but stressed that it remains committed to its stores-only strategy and does not intend to sell online.
Instead, the company said that it is confident of a resurgence in demand after the COVID-19 crisis ends, pledging: “We are going to be back.”
Primark’s latest sales drop admissions come at a time of unprecedented change in the U.K. fashion market, with Marks & Spencer snapping up the Jaeger brand and a consortium led by Next emerging as favorite to beat Authentic Brands to buy Topshop owner Arcadia from billionaire Sir Philip Green. Next has partnered with the U.S. hedge fund Davidson Kempner and is pitted against Authentic Brands, which has been linked to a joint bid with JD Sports.
Meantime, the former owner of Edinburgh Woollen Mills is buying up a number of his former brands from administrators and billionaire Mike Ashley-owned Frasers Group, and others continue to circle department store group Debenhams.
Under pandemic rules, 305 of Primark’s 389 stores around the world are currently closed, including all its 190 U.K. shops, plus a further 115 stores across European markets including Germany, Ireland, and Spain.
Offline-Only Strategy Hits Primark
Before the pandemic, Primark’s strategy to trade solely from brick-and-mortar stores had seen it continue to surge ahead as one of the U.K.’s most successful fashion retailers, focused on low prices and a growing overseas presence rather than investing heavily in online capabilities.
However, shop closures and other restrictions in Primark’s main U.K. and European markets resulted in a 30% drop in sales to $2.8 billion across the 16 weeks to 2 January 2021, compared with Christmas holiday period sales in 2019 totaling $4 billion, prompting it to revise its forecasts for the six month trading period to 27 February 2021 from an $896 million loss to more than $1.38 billion, assuming all its locked-down stores remain shuttered.
By contrast, online-only fashion retailers such as Asos and Boohoo saw sales boom by around 40% in the last four months of 2020. For its part, Primark had quickly abandoned its one limited-product experiment with online player Asos a couple of years back and a year ago the retailer affirmed it had switched its focus to growing overseas rather than in the highly competitive U.K. market.
John Bason, finance director at Primark’s owner, Associated British Foods (ABF), said: “I hate losing the sales we are going to lose but we are going to be back. People will want to go on holiday, meet one another and shop at Primark again.”
Bason added: “Are we losing sales here during these store closures? Yes, that is not in dispute here. But that does not mean that it pushes you to make uneconomic decisions about changing a winning business model.”
International Growth Fuelled Primark Profits
As part of its international expansion, Primark opened its first U.S. store in Boston in 2015 and has since added a further 11 outlets including locations in Brooklyn, Burlington, Danbury, King of Prussia, and Staten Island, plus American Dream in New Jersey, Sawgrass Mills in Florida, and State Street, Chicago.
Its determination to remain offline-only led the Irish-based retailer to open some of its stores for 24 hours in December and to continue its search for new store sites in Rome and Miami. It also opened a store in Paris in August, which attracted large queues upon opening.
Parent company ABF argued that a 14% same-store sales decline at Primark while stores remained open was “strong”, given a “significant decline” in commuters and tourists in city-centers. Sales at out-of-town retail park locations were higher than a year earlier, but sales at shopping centers and regional high streets were hit and, as a result, Primark is to store $275 million of unsold Fall and Winter season clothing to sell later this year.
Bason insisted: “Our price point is the reason that we can’t and other people cannot make money online. That makes us different. When we reopened back in June I met people who said ‘Thank God you’re open again, I’ve been waiting for you’. Why are they waiting? Because they can’t get what we offer elsewhere. We’re giving people want they want.”