Covid-19: Primark stops placing new orders to suppliers

UK fashion retailer Primark announced today (23 March) that it has “regrettably informed suppliers that we will stop placing new orders” in order to manage its stock during the global Covid-19 pandemic.

The retailer said that, as a result of the rapidly changing situation regarding the spread of the coronavirus, it had now closed all its stores in the UK. Indeed, all 376 stores in 12 countries are now closed until further notice.

Primark noted that the closures represent a loss of some £650 million of net sales per month. Unlike many other retailers, Primark does not have an eCommerce operation to continue trading now that its stores have closed their doors.

“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,” the company said.

“In the first instance we have implemented a significant reduction in discretionary spend. We are making good progress in also reducing fixed costs following discussions with counterparties, in particular landlords, and welcome the recently announced government support in the countries in which our stores operate.”

It added: “As a result, we currently estimate being able to recover some 50% of total operating costs.”

The UK government has announced a host of measures to help hold up the economy in these testing times. They include a £330 billion pot of business loans, a 12-month freeze on business rates, and a commitment to the PAYE workforce that 80% – or up to £2,500 per month – of their salaries will be covered if they lose work because of he coronavirus.

Primark parent company, Associated British Foods (ABF), also said that the group has a strong balance sheet, substantial cash liquidity with some £800 million of net cash at the half year, and a revolving credit facility of £1.1 billion. Total available liquidity is £1.9 billion.

ABF operates several other business departments. It used today’s statement to reiterate that it has not seen a material impact on its sugar, grocery, ingredients and agriculture operations as a result of the escalating health emergency.