Penneys owner warns coronavirus could threaten some supplies later in the year

Company says it imports approximately 45% of total clothing supplies from China

Penneys and Primark owner Associated British Foods said it was talking to existing suppliers in Bangladesh, Cambodia, Vietnam, Turkey and eastern Europe regarding a step-up in production to plug any China shortfall. Photograph: PA Wire

Penneys and Primark owner Associated British Foods said it was talking to existing suppliers in Bangladesh, Cambodia, Vietnam, Turkey and eastern Europe regarding a step-up in production to plug any China shortfall. Photograph: PA Wire

 

Penneys and Primark owner Associated British Foods warned on Monday there was a risk of supply shortages on some lines later in the 2019-20 financial year if delays in factory production in China were prolonged due to coronavirus.

AB Foods, which sources a broad assortment of its product from China, said it typically builds inventories in advance of the Chinese new year, and as a consequence is well stocked with cover for several months and does not expect any short-term impact.

“We are assessing mitigating strategies, including a step up in production from existing suppliers in other regions,” it said on Monday.

Finance director John Bason said the company imports “mid-40s per cent” of total clothing supplies from China.

He said the group was talking to existing suppliers in Bangladesh, Cambodia, Vietnam, Turkey and eastern Europe regarding a step-up in production to plug any China shortfall.

Shares slipped 2.3 per cent on the news. The shares have risen about 14 per cent over the past 12 months.

The group also owns major sugar, grocery, ingredients and agriculture arms. Several of its food businesses have operations in China. It said the China sugar campaign was completed in January before the coronavirus outbreak developed significantly.

The group said its AB Mauri, AB Agri and Ovaltine factories were operating, but at reduced capacity due to labour and logistics constraints.

AB Foods forecast first-half sales and adjusted operating profit ahead of the previous year. Its outlook for the full-year is unchanged.

Primark’s first-half sales were forecast to be up 4.2 per cent on a constant currency basis. – Reuters