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Primark to cut 400 jobs

Written by: Emma Lunn
The budget clothes chain has revealed plans to cut hundreds of jobs in a shake-up of store management.

Details of the proposals were outlined in a trading update from Primark’s owner Associated British Foods (ABF).

Primark has 191 stores in the UK, which currently employ 29,000 people. The fashion retailer plans to axe about 400 jobs.

ABF said sales in its UK stores were well ahead of last year – when the country was in lockdown. But like-for-like sales were 10% below two years ago, although sales improved in the final quarter of 2021. Trading was impacted by a decline in footfall as a result of the rapid rise in Omicron cases but “improved in recent weeks”.

The retailer said the cost of materials and the supply chain crisis has been mitigated by a favourable US dollar exchange rate compared to last year and a reduction in store operating costs.

However, it added that the business is still experiencing some delays on orders and that it expected “longer shipping times to continue for some time”.

The statement said: “We are proposing to simplify our in-store UK retail management structure as part of our ongoing programme to improve the efficiency of our store retail operations.

“We are also on track to launch our new, improved customer-facing website in the UK by the end of March, and across all our markets by the autumn. The new website will showcase many more of our products and will provide customers with product availability by store.”

However, unlike its rivals, Primark still doesn’t have plans to sell its products online.

Laura Hoy, equity analyst at Hargreaves Lansdown, said: “Primark-owner ABF’s diversified business offered a safety net throughout the pandemic, but as things normalise all eyes are on retail for signs of a comeback. Compared to last year, when store closures kept sales painfully low, revenue rose considerably. But sales at Primark have yet to make their way to pre-pandemic levels.

“There are a few reasons for this—chief among them being the resurgence in Covid cases which kept many shoppers at home at the end of last year. Primark doesn’t have much of a website, so it was at a disadvantage to peers who offered delivery and in-store collection. However, a new website is due to hit the UK in March which will give customers the ability to check item availability, but stops short of offering a full e-commerce experience.

“While Primark’s lack of digital presence leaves something to be desired in a global pandemic, we’re impressed by the group’s stock management. Last year’s autumn and winter stock made it to the shelves this year with very little discounting, which should be a welcome tailwind for cashflow.

“Inflationary headwinds are an unavoidable storm cloud hanging over just about everyone right now, but we think ABF is well-placed to ride it out. The group’s low-cost retail business will appeal to shoppers tightening the purse strings, and improved efficiency across all areas of the business together with price hikes in the grocery business look likely to offset the bulk of the pain for now. But if costs continue to balloon, it could become a problem for Primark as the group has very little space to increase costs due to its position as a discount retailer.”

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