Sell online? Not likely, insists Primark finance chief

After it was forced to close its doors to the public for the third time just before Christmas, hard on the heels of the November lockdown, Primark recorded a sales decline of 30% year on year in the four months to December 31. 

In total, the retailer has estimated a potential loss of sales totalling £1.05bn in its first half to February 27, assuming its stores remain closed until then.

If stores continue to be shuttered until the end of March, Primark has estimated a further £800m worth of lost sales and a reduction in profit contribution of £300m.

Despite the pain, Primark parent ABF’s finance director John Bason is supremely confident that Primark’s unique bricks-and-mortar proposition remains fit for the future and there is no need to sell online.

He told Retail Week: “We’ve been through two lockdowns and we’ve seen Primark come back strongly after both of them.

“Although like-for-likes of -14% in normal times would not be seen as good, it reflects lower spend in apparel and accessories overall, and when we do come back, [the experience of previous lockdowns is] our market share is rock solid.

“There’s been a shift online in apparel but its almost like we’re not affected by it – it’s going on around us. If anything, the lockdowns have really emphasised the value of what we offer. 

“We’ve got a fantastic offer and prices that nobody else can touch online or offline, and that’s why people come back to us.”

Bason highlighted the lack of redundancies at Primark, in contrast to some of its high street competitors, as evidence of its continued strength.

He said: “We will reopen, and whenever that time is – and it looks like it’s going to be a year on from when we first closed – we will have been through three major lockdowns and still have the same employee base, and we will have opened new stores. 

“When stores are closed, you lose sales and, absolutely, it’s horrible. The damage is £1bn of lost sales and I don’t like it, but that’s as far as that goes. 

“Are these lockdowns telling us that our business model is impaired and we’re in crisis mode and it’s getting worse?” The answer, he is confident, is no.

“People want to get through this. The vaccination programme is building and people will want to go back to having holidays, mixing with people. And guess what? People will want to shop at Primark again,” Bason added.

City analysts appear to agree that Primark will prove itself resilient enough to weather the storm without an online offering.

RBC Europe analyst Richard Chamberlain said: “We expect ABF’s largest business, Primark, to drive further share gains post-stores reopening with its compelling price points.

”Although it lacks a transactional digital offer, we think its prices act as a barrier to entry versus online competitors and we see an opportunity for it to accelerate US expansion.”

Jefferies analyst James Grzinic observed: “Primark retains its ability to recover sales extraordinarily quickly once restrictions subside.”

Bason also questioned the economics of selling online at Primark’s low price points. He believed no retailer would be able to make a profit on the same basis, which is testament to the highly honed efficiency of the Primark bricks-and-mortar model.

“If you go to online, or even click and collect, you’re going to be adding costs,” he said.

“We’ve got a supply chain where everything you’ve got is packed at source and those cartons don’t get opened until they’re in the stores. 

“A third party needs to pick and pack individual items, and as soon as it comes out the carton it costs money. If it’s a pair of £1 flip-flops, by the time you’ve picked it your profit is gone. If it’s a £3 item, by the time you’ve picked it and packed it, your profit is gone. It doesn’t matter if its a third party or us.” 

Bason concluded: “Yes, it’s painful, but it’s not like we’re going to lose sales forever”.

With a Covid vaccination programme underway, it will be clear within months the extent to which Bason’s confidence is justified. As far as he is concerned, renewed success is a question of not if, but when.