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H&M, Primark brace for downturn in Europe as epicenter shifts
[STOCKHOLM] Hennes & Mauritz AB and Primark are bracing for an unprecedented slump in European sales as the epicenter of the coronavirus outbreak shifts from China.
Primark has closed shops that generate 30 per cent of its total revenue as governments ordered shutdowns. H&M is shutting stores in 13 European countries, including Italy, which has more than 24,000 cases of Covid-19. The number of cases is rising in Europe, especially in Spain, Germany and France.
Retail has become a bellwether of the crisis as China begins to recover and Europe goes into freefall. Primark, which sources many garments from China, said supply shortages from that market will be minimal. H&M, which closed 334 of its 518 Chinese stores at the peak of that country's outbreak last month, has reopened most of those.
H&M shares dropped as much as 11 per cent, while Associated British Foods Plc, which owns Primark, declined 5.6 per cent.
ABF said the outbreak will slice 190 million pounds (S$332 million) from revenue if the stores are closed for four weeks.
"We are not remotely talking about laying anyone off," said finance director John Bason in an interview. "We are going to support our employees and we have a team that has been working 24 hours a day for the last few days to try and mitigate the impact."
Stockholm-based H&M said sales in China dropped 24 per cent in the fiscal first quarter. A slump in February wiped out a strong December and first half of January, which had growth of 27 per cent.
The crisis is hitting H&M amid a change in top management. Helena Helmersson became chief executive officer at the end of January, replacing family scion Karl-Johan Persson.