Primark Makes Contingency Plans for Coronavirus Supply Cut
The owner of the Primark budget fashion chain warned that any prolonged manufacturing delays at its factories in China due to the coronavirus could cause supply shortages on certain lines later this year.
Associated British Foods Plc has built up inventories and is “well stocked for cover for several months,” according to a statement, which said the virus could cause problems over the longer term. “We are assessing mitigating strategies, including a step up in production from existing suppliers in other regions.”
The shares fell as much as 2.8% early Monday in London. Over the past 12 months they’ve risen about 11%.
While the situation in China is “fluid,” the company will adjust its merchandising strategies in shops so that most customers will not notice, finance director John Bason said in an interview.
“Empty shelves just won’t happen,” he said. “The Chinese authorities are pulling out all the stops to get people back to work.”
AB Foods joins the likes of apparel chain Next Plc in warning of risks to its supply chain if the disruption from the outbreak, which began in China, continues. Many consumer-goods brands, meanwhile, have been hit by a slump in demand as stores in that country have been shut to try to prevent the spread.
The company said factories in China that make its agricultural, Ovaltine and bakery businesses were operating at reduced capacity due to labor and logistics constraints.
Despite the virus risks, AB Foods said its outlook for the year remains unchanged. Sales at Primark will be 4.2% ahead of last year in the first half at constant currency rates, driven by increased store space, the company said. Sales at Primark in the U.K. were strong in November and December but have weakened since then, it added.
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