The owner of budget fashion firm Primark has said 68,000 staff have been furloughed across Europe amid the coronavirus lockdown as it revealed a £248m hit for unsold stock as all its stores remain shut.
Associated British Foods boss George Weston said the group had been “squarely in the path of this pandemic”, but would not reopen Primark stores until the disease is under control.
Primark has seen sales plunge from £650m a month to zero as coronavirus has caused the 376-strong chain to shut completely, with no online business to fall back on.
Half-year results showed pre-tax profits slumped as Primark was left with piles of stock it was unable to sell amid the global coronavirus lockdown, falling 42% to £298m in the six months to February 29.
Total charges in the first half soared to £309m, compared with £79m a year earlier, including the £248m stock costs.
Primark revealed on Monday it had agreed to pay an additional £370m to suppliers to cover stock currently in production or yet to be delivered after facing criticism over order cancellations during the coronavirus crisis.
The fashion chain said the deal will cover products which were in production or due for shipment by April 17, having previously committed to pay for orders which were in transit or booked for delivery by March 18.
Bosses also set up a fund to support the thousands of garment workers affected.
Mr Weston laid bare the “human tragedy” of the Covid-19 crisis as he reported half-year figures, as he said two of the group’s employees have died from Covid-19 in the past three weeks while another remains in intensive care in the United States.
AB Foods said the timing of when it will reopen stores is uncertain and that the process will also be “complex”, but will only be done so when it is safe.
Its food and agriculture business – spanning sugar, grocery and ingredients, including brands such as Twinings tea and Kingsmill bread – is helping the firm weather the crisis while cost cutting will also help it mitigate half the operating costs of Primark while stores remain shut.
Mr Weston said: “Much as I would love to be allowed to reopen Primark stores across the UK, continental Europe and the USA soon, because lockdown has so harmed our business and our supply chains, I know that we must not do so until we have suppressed this disease.
“When we are allowed to reopen we must make our Primark stores safe for our staff and our customers, even if that means ensuring there are fewer people shopping at any one time and so accepting lower sales at least until the remaining risk is minimal.
“In time we can rebuild the profits. We can’t replace the people we lose.”