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Penneys owner scraps interim dividend after all stores closed

 

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Lockdown: All Penneys and Primark stores are currently shuttered. Photo: Gerry Mooney

Lockdown: All Penneys and Primark stores are currently shuttered. Photo: Gerry Mooney

Lockdown: All Penneys and Primark stores are currently shuttered. Photo: Gerry Mooney

Penneys owner Associated British Foods will not pay an interim dividend to save cash during the coronavirus crisis and has booked a £284m (€322m) charge to reflect an expected lower value of stock when its stores reopen.

The company did not give profit guidance for its full 2019-20 year to end-August, but reiterated they will be "much lower" than envisaged at the start of the financial year, because the group does not know when its stores will emerge from lockdowns.

All of Primark's 376 stores in 12 countries have been closed since March 22, representing a loss of £650m of net sales per month. "One of the world's great clothing retailers is entirely shut," CEO George Weston said yesterday.

Primark, which does not have an online business, generates about half of AB Foods' revenue and profit.

The group said it would be able to mitigate half of the operating costs of the Primark business while the stores remain closed, with 68,000 employees receiving furlough payments from governments across Europe.

But it said the timing of the reopening of the stores remains uncertain, while the process of reopening, once it begins, was likely to be complex, with costly social distancing measures needing to be implemented. "It's the right thing to do and we have no choice anyway because no one's going to want to come into a store which ignores social distancing," Mr Weston told Reuters.

He said the only country where Primark had visibility on stores reopening was Austria, with its five stores there expected to reopen in the first week of May.

AB Foods said its second half expectations for its other businesses - sugar, grocery, ingredients and agriculture - were unchanged.

"It's clear to us that a full Primark run rate (pre-crisis sales levels) is unlikely to be re-established until its 2022 fiscal year. Many of its high street peers either may not be around by then or rapidly shutting stores," said analysts at Barclays.

For the group's first half to February 29, adjusted operating profit rose 7pc to £682m, on revenue up 2pc to £7.6bn.

But statutory operating profit fell 38pc to £349m after exceptional charges of £309m, including the provision for Primark stock.

Mr Weston said it would be "entirely inappropriate" to pay an interim dividend. Not paying one will save the group about £100m. It would consider paying a dividend at the year end in the light of trading for the full financial year.

Reuters

Irish Independent