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Pre-tax profits at Associated British Foods (ABF.L) have slumped 34% over the past year, as it estimated COVID-19 had cost it £2bn ($2.6bn) in lost sales at Primark.
The Primark owner, a global group with food, ingredients and retail arms, was weighed down by the impact of COVID-19 restrictions on retail in Europe and the US.
“Unable to sell anything, Primark moved from profit to loss in a few short days, with no visibility as to how long these conditions would persist,” it said in its annual results about the impact of lockdowns earlier this year. On Monday it said fresh closures across Europe would cost it £375m in lost sales.
It said adjusted pre-tax profits for the wider group had fallen by more than a third to £914m in its full year to 12 September. It recorded £156m in exceptional costs. Group revenue slid 12% to £13.9bn.
“The full year decline in group revenue was mainly seen in the third quarter, driven by the total loss of sales for the period in which Primark's stores were closed,” it said. “The decline in the full year adjusted operating profit for the group was a consequence of this. We estimate that Primark lost £2bn of sales and some £650m of profit as a result of COVID-19.”
It defended a decision not to pay dividends for this financial year. “Our experience of the cash outflow following government restrictions that required us to close all of our stores in March and, at the time of writing, the increasing restrictions in a number of Primark's major markets, lead us to be cautious.”
WATCH: Primark credits ‘pent-up demand’ for sales boost earlier this year after the first lockdown
But it said trading had been “robust” since reopening over the summer, with £2bn in revenue at Primark until the end of the financial year. “Primark sales reflect the way that people live their lives. Sales were ahead of pre-COVID-19 levels in children's, leisure and nightwear and weak in formal menswear and travel accessories,” it said.
Meanwhile operating profits leapt 26% on an an adjusted basis in its other grocery, sugar, ingredients and agriculture arms, with growth across the board.
Its grocery division, which includes Twinings, Ovaltine, Kingsmill, Jordans, Dorset cereals, Ryvita and Patak’s, saw increased revenue and profits.
The company updated shareholders on Brexit too. “Following the UK's exit from the EU, our businesses have completed all practical preparations for the end of the transition period and contingency plans are in place should our businesses experience some disruption at that time.”
“The pandemic has meant sales at Primark owner ABF have swung like a yo-yo this year, but ultimately its fashionable, low cost model kept customers loyal, and the tills ringing since stores reopened,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
“The first nationwide lockdown wiped £2bn off revenues, but pent up demand once doors were flung open once again helped make up those losses. Profits are still down dramatically on last year and sales are once again set to drop like a stone as restrictions come back into place across its key markets.”