Feeding lockdown 2.0 into the model AB Foods reported slightly better than expected FY Sep-20 earnings, to go with stronger cashflow reported yesterday. It is the new wave of lockdowns that matter, however, and today is mainly about factoring in the earnings cut from Primark store closures. Not such a sweet outlook for FY-21 Lockdown 2.0, which by later this week will mean that almost 60% of Primark''s selling space is once again closed, is guided to reduce revenues by GBP 375m. We estimate that these stores will make losses of GBP 90m during closure, although accessing furlough schemes could soften the impact. There are also likely to be fewer Grocery tailwinds ahead, with Twining''s cost savings already landed, risks around supermarket discounting, and a likely adverse mix back to food service. Addressing the medium term questions Many factors demonstrate the strength of Primark''s model when its shops can open: its strong trading since the end of the first lockdown (in many locations flat or higher sales than last year); maintained market share despite the industry''s shift online; its impressive fourth quarter margin (c.9.0%); its continued social media engagement levels; improved momentum in Germany as it adjusts store size and sustainability messaging; and its development of growth avenues in the US and Poland. Until prompted in QandA, management did not mention online but the roll-out of click and collect-enabled till points does suggest trials could be possible in the coming year or two. A Christmas jumper? AB Foods shares have weakened as a second lockdown has become reality. We cut our Sep-21 Adj EPS forecasts by 15% to c.107p (consensus prior to today c.120p) but clearly there is downside risk if these lockdowns extend. We cut our target price to 1,950p, assuming a long term Primark margin of 9%. This offers upside, particularly if trading is able to resume throughout December, but we prefer stocks elsewhere in the sector where...