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None of us knew how the pandemic was going to play out, but during the first lockdown companies which had not adapted their business proposition at the start, at least had clear plans on what needed to be done by the end of it.

A year into the pandemic and three national lockdowns later and businesses up and down the country have generally had little choice but to adapt to the ‘new normal’. They have devised new ways to get their products and services to customers and transformed how they operate into something fit for a pandemic - and eventually post-pandemic - world.

Few have had the desire, or indeed the financial capacity, to simply hunker down, shut up shop and wait for the proverbial storm to pass. Except Associated British Foods (ABF) - owned Primark, that is.

The fast fashion retailer has steadfastly refused to shift its 100% reliance on in-store sales into the online world. While the lockdowns have been in place, sales have ground to a halt as its shops have remained shuttered.

That has come at a price though. Primark will lose at least £1.1 billion of sales from store closures due to lockdown in the six months to February, a small increase on the £1.05 billion forecast previously. In the same six months to February last year sales topped £3.7 billion.

It finally got to reopen 153 stores in England on 12 April and is expected to reopen 233 elsewhere in the UK and in other countries by 26 April, but the impact cannot be written-off by a few days’ trading. We know from ABF that there will already be a further £480 million impact in the second half.

The reopening though is, of course, good news for the chain. Being able to open up these remaining closed stores will boost its retail space trading to 83%. But there is no way that Primark can make up for all those months of lost sales - even with dedicated shoppers queuing around the block as soon as stores reopen - as they have done after every lockdown so far.

Loyal customers are one thing very much in Primark’s favour. As is the fact that what it sells are clothes. Clothes and shoes, while of course seasonal and subject to changing trends, are at least non-perishable and so Primark can bank on about £150 million of spring and summer stock, paid for and held over from last year, finally being sold. That will boost cash flow in the second half of the year. The £260 million of autumn and winter stock that couldn’t be sold during this latest lockdown will just have to be put into storage and brought out onto the shop floors at the relevant time later this year.

Something else in Primark’s favour is the weak pound, which will play into the hands of Primark, which like so many other fast fashion retailers, sources most of its garments from Asia. At current rates the benefits to Primark of the weak pound could stand to cancel out the impact of higher freight costs. So much so that analysts watching the stock at Barclays say they expect a strong profit recovery in 2022, driven by a return to more normal trading conditions at Primark, a weaker dollar and continued store expansion.

But the pain the pandemic has caused is not going to go away overnight. And that is likely to be a drag on parent company ABF, where the Primark brand has typically generated more than three-fifths of group operating profits alone.

ABF has already warned that Primark will barely break-even on an adjusted operating profit basis in the first-half. That compares with £441 million it did generate in the same period in the previous financial year.

However, as far as ABF stands, all is not lost. The benefits of diversifying and not ‘having all your eggs in one basket’ are on show here, because the mini conglomerate will still benefit from a strong performance in its non-retail divisions, with first-half revenue and profit in grocery, sugar, agriculture and ingredients businesses set to be “ahead of both expectations and the first half of last year”.

Primark may have been out of step with the rest of the fashion pack for most of the past year, but once we come out the other side of the pandemic and with its other businesses helping at least make up some of the difference, parent company ABF, which began life 86 years ago as Food Investments Limited, is an octogenarian who should have enough resilience to withstand the pandemic.

Interim results are due out on Tuesday.

More on Associated British Foods (ABF)

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