Penneys owner scraps dividend to save cash during Covid-19 crisis for retailer

The owner of Penneys-Primark retailer will not pay an interim dividend to save cash during the coronavirus crisis and has booked a £284m (€325m) charge to reflect an expected lower value of stock when its stores reopen.

Associate British Foods (ABF) also did not give profit guidance for its full 2019-2020 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 across Europe and the US.

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,” chief executive George Weston said.

Primark, which does not have an online business, generates about half of ABF’s revenue and profit. It 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.

ABF said its second half expectations for its other businesses - sugar, grocery, ingredients and agriculture - were unchanged. Shares in the group, the majority of which are owned by Mr Weston’s family, fell almost 6%, extending losses for 2020 to 28%.

The group’s first half to the end of February adjusted operating profit rose 7% to £682m on revenue up 2% to £7.6bn.

But statutory operating profit fell 38% 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.