By James Davey
LONDON (Reuters) - Associated British Foods (LON:ABF)' Primark clothing business is currently coping with disruption to Red Sea shipments and is hopeful customers will not notice any difference to the stock in stores, its finance chief said on Tuesday.
Attacks by the Iran-aligned Houthi militia on ships in and around the Red Sea since November have slowed trade between Asia and Europe and alarmed major powers in an escalation of the war between Israel and Palestinian Hamas militants in Gaza.
The alternative shipping route around South Africa's Cape of Good Hope can add 10-14 days to a journey compared to passage via the Red Sea and Suez Canal.
"We have a bit of experience of adjusting on our supply chain, so you adjust - you adjust your timings, you adjust your stock flow through the depots and so on," AB Foods finance director Eoin Tonge told Reuters in an interview after the group updated on trading.
"We're hopeful they'll (customers) never notice it in stores," he said. "Some of our store managers might notice, little bits and bobs might be impacted but we don’t think the customer should be impacted that much."
Tonge said Primark was monitoring the situation in the Red Sea closely and was speaking to its shipping partner Maersk at a senior level on a regular basis.
“We expect to see increased surcharges from Maersk but we’re not incurring them at the moment,” he said.
“With the way our contracting works and just in general how we see the market, we don’t think it will be that material.”
Tonge said if the Red Sea disruption continued beyond Easter, Primark would have to place earlier orders with suppliers.
"That means we will just be carrying a higher amount of stock, there’ll be more stock on the water,” he said, adding using air freight would not be economical or sustainable.
Tonge also said he did not anticipate any significant pricing moves from Primark in its 2023/24 year.
Rival Next and discounter Pepco Group have warned that a prolonged issue in the Red Sea region could impact supply in the coming months. Marks & Spencer has said the disruption will cause some slight delay in deliveries.