Hopes for re­tail re­vival as Pri­mark sales bounce

The cut-price fash­ion chain’s surg­ing sales only pro­vide a faint glim­mer of hope to a re­tail in­dus­try shaken by coro­n­avirus

The Daily Telegraph - Business - - Front Page - By Laura Onita and Tim Wallace

SHOP­PERS have flocked back to re­tail bellwether Pri­mark amid grow­ing signs of a re­cov­ery on the bat­tered high street.

The bricks-and-mor­tar bud­get fash­ion chain re­vealed that trad­ing was much bet­ter than ex­pected in the three months to Sept 12 – and it now ex­pects an­nual op­er­at­ing prof­its to be at the top end of es­ti­mates of be­tween £300m and £350m.

It came as data firm Spring­board said that Greater Lon­don foot­fall was fi­nally show­ing ev­i­dence of a sig­nif­i­cant bounce­back, and as the Bri­tish Re­tail Con­sor­tium re­vealed that over­all, shop­pers spent 3.9pc more in Au­gust than a year ear­lier.

Sep­a­rate spend­ing data from Bar­clay­card showed that de­mand for en­ter­tain­ment and leisure had also risen, in part driven by Chan­cel­lor Rishi Su­nak’s “eat out to help out” meal sub­sidy scheme.

The jump will spark hopes that the con­sumer en­gine at the heart of Bri­tain’s econ­omy is kick­ing up a gear.

But city cen­tre foot­fall re­mains far be­low nor­mal lev­els, swathes of the high street econ­omy are still suf­fer­ing and the progress could yet be de­railed if job losses surge at the end of the tax­payer-funded fur­lough scheme next month. Ra­heel Ahmed, of Bar­clay­card, said: “It seems the fi­nal throes of sum­mer have spurred house­holds to get out and about, with cloth­ing stores, pubs and bars wel­com­ing growth for the first time since lock­down be­gan.

“How­ever, de­spite the high street show­ing some signs of re­cov­ery, chal­leng­ing times still lie ahead in cer­tain sec­tors. Months of lock­down have helped ac­cel­er­ate the trend to­wards dig­i­tal, with surges in ar­eas such as on­line or­der­ing of take­aways and buy­ing gro­ceries on­line.”

Pri­mark’s an­nounce­ment of a sales bounce will drive hopes of a wider re­cov­ery as it has long been seen as an in­di­ca­tor of wider con­sumer spend­ing.

The re­tailer, owned by par­ent com­pany As­so­ci­ated Bri­tish Foods, said it had con­tin­ued to lure cus­tomers to its stores from other ri­vals in May, June and July, and now had its high­est ever share of the cloth­ing mar­ket.

Yet although prof­its will be bet­ter than first feared when Covid brought the econ­omy to a crash­ing halt, they are still set to be sig­nif­i­cantly down on the £913m hit a year ear­lier.

John Ba­son, its fi­nance chief, said the fig­ures had proved in­dus­try ex­perts wrong. There had been con­cerns the bricks-and-mor­tar-only chain would lose ground to ri­vals with web­sites af­ter its near-200 UK stores were forced to close for months. Mr Ba­son said: “Has the brand been dam­aged? Well this [up­date] says ‘ab­so­lutely not’. If any­thing, we’ve come out even stronger.”

The com­pany ex­pects sales to hit £2bn be­tween the lift­ing of lock­down and the end of Septem­ber. They fell from £650m a month to zero when all its branches were forced to shut.

Peo­ple have also been buy­ing more clothes in one go, which has helped off­set lower foot­fall. It has been sell­ing most of its wares at full price af­ter it feared it would have to shift some at a dis­count, or store them in ware­houses for next year.

But some branches in city cen­tres are still hold­ing back sales be­cause there are fewer com­muters and tourists vis­it­ing shops.

Pri­mark’s UK sales are down 12pc this year. If four of its largest city cen­tre stores were to be ex­cluded, the drop would be just 5pc.

De­spite this, Mr Ba­son said Pri­mark re­mained com­mit­ted to th­ese stores and shop­pers would grad­u­ally re­turn.

Al­le­ga­tions of sup­ply chain abuses at Boohoo have taken the shine off fast fash­ion. Yet, a re­turn to form at Pri­mark is still some­thing to cheer. If the high street was a grim place pre-pan­demic, it has been ut­terly dire since.

Lock­down has emp­tied our towns and cities, with cat­a­strophic con­se­quences for re­tail­ers, restau­rants, pubs, the arts, and many other ser­vice in­dus­tries that rely on phys­i­cal ac­tiv­ity.

With­out fur­ther sup­port like the Chan­cel­lor’s sub­sidised “eat out to help out” voucher scheme, whole ar­eas will be aban­doned, with grave con­se­quences for the econ­omy.

The vigour with which one of the UK’s most for­mi­da­ble re­tail chains has bounced back pro­vides hope that there is still life out there.

Trad­ing beat ex­pec­ta­tions over the past quar­ter af­ter Pri­mark threw open its doors to shop­pers again in June.

Bas­ket sizes are also up and owner As­so­ci­ated Bri­tish Foods ex­pects the re­tailer’s prof­its to be at the upper end of re­vised Covid fore­casts at the end of the year.

In­deed, the chain sounds pos­i­tively chip­per, boast­ing that sales over the last four weeks were the “high­est ever… for this time of year”. The re­sults are par­tic­u­larly im­pres­sive given that Pri­mark has no on­line op­er­a­tion to speak of, mean­ing it has com­pletely missed out on the lock­down in­ter­net bo­nanza.

Yet, it is im­por­tant not to read too much into th­ese fig­ures. For a start, they only cover a short pe­riod and, as Pri­mark it­self ac­knowl­edges, the re­bound will partly be driven by “some pent-up de­mand”, which is why it is al­ready slow­ing.

The same can be said for the broader high street. Yes, high street foot­fall was up 2.6pc across the UK last week, ac­cord­ing to data provider Spring­board. In Greater Lon­don, the fig­ure was dou­ble that. But hold the cel­e­bra­tions. In the cen­tre of the cap­i­tal, where there is a high con­cen­tra­tion of of­fice work­ers, lev­els are still half what they were last year. For the rest of the UK, vis­i­tor num­bers are off by a quar­ter. Per­spec­tive is ev­ery­thing. Pri­mark was floored by the cri­sis. When the last of its stores closed on March 22, sales went from £650m a month to zero overnight.

Yes, turnover since re­stric­tions were lifted is set to hit the magic £2bn mark by the end of the year, and prof­its will be at the upper end of the City’s dras­ti­cally re­vised pre­dic­tions, but at £350m, the bot­tom line will still come in just un­der two thirds off the £913m recorded in 2019.

The UK high street has served the chain well but it is clearly be­gin­ning to look fur­ther afield more se­ri­ously now, en­cour­aged no doubt by the di­verg­ing for­tunes of its hun­dreds of stores. Those in re­tail parks are per­form­ing strongly but its high street shops re­main de­cid­edly be­low par.

Over­seas ex­pan­sion is be­ing stepped up with an­other 700,000 sq ft of space ear­marked for Spain, the US, Italy, France and other coun­tries, to add to new out­posts in Paris, War­saw and Stras­bourg.

But there’s a big­ger point that is in dan­ger of be­ing missed. Pri­mark isn’t just any or­di­nary re­tailer. It has al­ways been an out­lier and ba­sic eco­nom­ics says that its cut-price fash­ion, which has al­ways been pop­u­lar, will be even more of a hit dur­ing a vi­cious down­turn. Its im­prov­ing for­tunes pro­vide a glim­mer of hope but noth­ing more than that.

‘Pri­mark isn’t just any or­di­nary re­tailer. It has al­ways been an out­lier’

Pizza Ex­press tastes free­dom

On the face of it, a deal to close 73 restau­rants at Pizza Ex­press will do lit­tle to trans­form its prospects. Af­ter slim­ming down, it will still have 400 UK sites, in­clud­ing thank­fully my lo­cal one at South Wood­ford.

Food snobs wouldn’t be seen dead in Pizza Ex­press but I speak from per­sonal ex­pe­ri­ence when I say, for par­ents with young kids, it is about the best of the many big chains that still clut­ter up the high street. Yet, it’s a sweep­ing fi­nan­cial over­haul that will make a real dif­fer­ence. Af­ter be­ing passed around the pri­vate eq­uity in­dus­try like a soggy margherita for the last 20 years, the com­pany was in a pre­car­i­ous po­si­tion be­fore the cri­sis. Lock­down merely threat­ened to de­liver the fa­tal blow.

Land­lords have also agreed to re­duce rents, but the fi­nal piece of the puz­zle is a debt-fore­quity swap that ef­fec­tively hands con­trol to its cred­i­tors in re­turn for debts be­ing cut from £735m to £319m, and a £144m cash in­jec­tion.

Free from the dead hand of pri­vate eq­uity, a tired, but still pop­u­lar, house­hold name should be granted a much-needed new lease of life.

Tak­ing the bis­cuit?

Pro­duc­tion of Wagon Wheels and Jam­mie Dodgers could be halted af­ter staff threat­ened to strike over pay.

Par­ent com­pany Bur­ton’s has been ac­cused of mak­ing a “de­risory” of­fer. But, ac­cord­ing to the com­pany, the GMB is de­mand­ing a 7pc pay hike. That would be quite the rise even if the econ­omy was in rude health. Sounds like it’s the union that is tak­ing the bis­cuit.

Moves like Jag­ger A worker ar­ranges stock at the Rolling Stones’ global flag­ship store, RS No. 9 Carn­aby, in Carn­aby Street, Lon­don, in prepa­ra­tion for its open­ing to­mor­row. Cre­ated with Bravado, the shop will sell fash­ion items and mer­chan­dise.

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