The owner of Primark defended its treatment of suppliers yesterday as it warned that it would take a hit of hundreds of millions of pounds a month after the coronavirus pandemic forced the fashion chain to close its doors.
Associated British Foods has shut all 376 Primark shops in the 12 countries in which the chain operates. It closed its 189 shops in Britain on Sunday.
The FTSE 100 company said that it would suffer a loss of about £650 million of net sales a month from the closure of Primark. The fashion stores employ about 78,000 staff worldwide, including 37,000 in Britain.
It also confirmed that Primark would stop placing new orders with its suppliers. The business’s relationship with companies in its supply chain is under scrutiny after it emerged at the weekend that it was cancelling new orders. Primark has about 800 suppliers, which make products in 1,033 factories, and China, where the Covid-19 outbreak began, is a leading source of its goods.
John Bason, ABF’s finance director, said: “There is a substantial amount of stock on the water coming towards Europe. We will pay for that stock and we will take it, even though we don’t have any shops open to sell it.”
However, Mr Bason, 62, said of orders that were yet to leave manufacturers: “We are having detailed one-on-one conversations with all suppliers to work our way through this. This is not cold-hearted; this is working with people and that to me is a responsible approach to our supply chain.”
The company that would become Associated British Foods was set up 85 years ago. Still controlled by the Weston family, its billionaire founders, ABF is one of the few remaining conglomerates on the London stock market, with operations in sugar, ingredients and groceries, as well as the Primark fashion chain. The group said yesterday that its other businesses had not experienced “a material impact” from the coronavirus.
While Mr Bason did not comment on whether ABF would follow other companies and cut its dividend because of the pandemic, the company said that it had about £800 million of net cash and a £1.1 billion credit facility, giving it £1.9 billion in available liquidity. Cutting or cancelling dividends is a way for businesses to conserve cash.
ABF paid about £366 million in dividends for 2019, of which about £199.5 million went to Wittington Investments, the Weston family vehicle that owns 54.5 per cent of the company. The Garfield Weston Foundation, which supports charities, owns 79.2 per cent of Wittington.
Asked whether Primark would be forced to cut jobs, Mr Bason said: “We’re going to stand by our employees.” He said that the company had not made redundancies because of the pandemic and would use programmes put in place in countries including Britain to subsidise wages. ABF had said at the weekend that employees affected by closures would receive full pay for their contracted hours for 14 days, after which the situation would be reviewed.