British fashion linchpin gets post-lockdown trading lift

Customers queue outside the Primark store in Edinburgh as the UK eases coronavirus restrictions which forced the fashion chain to close 375 outlets. (AFP)
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Updated 03 July 2020

British fashion linchpin gets post-lockdown trading lift

  • Primark ‘back to business’ as curbs ease, but still faces full-year profit slump

LONDON: Trading in British fashion chain Primark’s reopened stores has been encouraging, but the prolonged coronavirus lockdown means the retailer’s full-year profit is likely to slump by about two-thirds, owner Associated British Foods said.

All 375 Primark stores were shuttered in March as the pandemic spread. As governments eased lockdown restrictions the stores reopened, including all 153 stores in England on June 15.

AB Foods said on Thursday that since the reopening of the first Primark stores on May 4, cumulative sales for the seven weeks to June 20 were £322 million ($403 million) and were 12 percent lower than last year on a like-for-like basis.

It said sales in the week ended June 20, with more than 90 percent of selling space reopened, were £133 million, and trading in England and Ireland was ahead of the same week last year.

“We’re really getting back to business here. That number (down 12 percent) is much better than people were expecting,” AB Foods finance chief John Bason told Reuters.

HIGHLIGHTS

  • Primark like-for-like sales down 12 percent in seven weeks.
  • Primark’s annual profit seen down by two-thirds.
  • Placed £800m of orders for autumn/winter season.

However, the lockdown means Primark’s profit will be substantially down. The retailer has no online offer.

For the full 2019-20 year, Primark forecast adjusted operating profit in a range of £300-£350 million, down from the £913 million made in 2018-19.

Bason said that Primark has also placed more than £800 million of orders for the autumn/winter season and expects the total to exceed £1 billion.

AB Foods said that overall group revenue from continuing businesses for the 40 weeks to June 20 was 13 percent lower than the same period last year at constant currency.

For 2019-20 it expects “strong progress” in adjusted operating profit at its sugar, grocery, agriculture and ingredients businesses.

The grocery division, whose brands include Kingsmill bread, Twinings tea, Ovaltine and Jordans cereal, had a 9 percent increase in third-quarter revenue, with higher sales through retail channels more than offsetting weaker demand from foodservice businesses closed during the lockdown.

The group expects to end the year with net cash of more than £750 million.


BP said to be considering sale of Mideast ‘stranded assets’

Updated 42 min 5 sec ago

BP said to be considering sale of Mideast ‘stranded assets’

  • Major oil companies typically hold assets for the long term

LONDON: BP is preparing to sell a large chunk of its oil and gas assets even if crude prices bounce back from the COVID-19 crash because it wants to invest more in renewable energy, three sources familiar with BP’s thinking said.

The strategy was discussed at a BP executives meeting in July, the sources said, soon after the oil major lowered its long-term oil price forecast to $55 a barrel, meaning that $17.5 billion worth of its assets are no longer economically viable.

But even if crude prices bounce back to $65-$70 a barrel, BP is unlikely to put those assets back into its exploration plans and would instead use the better market conditions as an opportunity to sell them, the three sources said.

Major oil companies typically hold assets for the long term, even when crude prices plunge, with a view to start bringing more marginal production online when market conditions improve.

However, BP’s new divestment strategy, which has not previously been reported, means there will be no way back for the British energy company once it has offloaded its so-called stranded oil and gas assets.

BP did not respond to requests for comment.

The new strategy also sheds more light on chief executive Bernard Looney’s plan to reduce BP’s oil and gas production by 40 percent, or at least 1 million barrels per day, by 2030 while expanding into renewable energy.

“It is a simple calculation of natural production decline and planned divestment,” said a BP source, explaining how BP became the first big oil company to pledge a large cut in its oil output.

For decades, BP and rivals such as Royal Dutch Shell and Exxon Mobil have promised investors that production would continue to rise. But as climate activists, investors, banks and some governments raise pressure on the industry to reduce emissions to help cool the planet, European oil firms are changing tack and pledging to invest more in renewable energy sources.

US rivals are under less government pressure and have not made similar commitments on renewables.

“As we look at the outlook for BP over the next few years and as we see production declining by 40 percent it is clear we no longer need exploration to fund new growth,” Looney said this week. “We will not enter new countries to explore.”

He said that BP would continue to explore for oil near its existing production infrastructure as those barrels would be low cost — and help boost BP’s cash flow to fund its transition to cleaner energy.

BP also raised its target this week for returns from asset sales to $25 billion between 2020 and 2025, of which about $12 billion has already been lined up.

Parul Chopra, analyst at Rystad Energy, said in addition to Angola, he expected BP to move out of Azerbaijan, Oman, the UAE and Iraq.

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