Coronavirus: Penneys owner warns of hit to clothing supply from China
Discount clothing retailer Primark, which trades here as Penneys, has warned that the coronavirus could affect its supply chain and product lines later this year, if delays to factory production in China are prolonged.
Primark sources an assortment of its product from China, but builds inventories ahead of the Chinese new year.
UK conglomerate Associated British Foods (ABF), which owns Primark, said because of that, the retailer is stocked for several months and there shouldn’t be any short-term impact.
However, it said: “If delays to factory production are prolonged, the risk of supply shortages on some lines later this financial year increases.”
ABF said it is assessing “mitigating strategies” for Primark/Penneys product supply, including “a step-up in production from existing suppliers in other regions”.
Primark expects a 4.2% increase in sales for the first half of its financial year, covering the six months to the end of February.
UK sales are expected to be 3% up on a year-on-year basis.
A large driver of growth will be the eurozone, where combined sales are likely to be up by over 5%.
ABF finance director John Bason said while sales growth has been particularly strong in France, Belgium, and Italy, Ireland is key to Primark’s eurozone growth, despite the closure of one store here last year.
“A key element of the improvement in the eurozone performance of Primark was an improvement in our trading in Ireland,” said Mr Bason.
The one store closure related to a store in Rathfarnham, which was very small and therefore unable to showcase the best of Penneys.
“Ireland is the home of Penneys and you should expect a continued development of our presence there.”
The likes of Samsung and Apple have already seen their supply chains hit by the coronavirus. Apple is due to miss quarterly revenue targets as iPhone production in China has been impacted.
And, with Wuhan being a large base for the world’s pharmaceutical industry, the supply chains of many of the world’s leading drug firms with facilities in Ireland could still be hit hard.
