Penneys posts 20-fold increase in profits and €475m payout for shareholders

Penneys has reported a more than 20-fold increase in profits for the latest financial year as shareholders are set to receive €475 million in dividends.

Financial statements filed by Primark Limited, Primark’s main trading entity in Ireland which operates stores under the Penneys brand, show the company brought in €394 million in profit before tax in the year to September 17th, 2022. This is more than 20 times the pretax profit of €19 million reported by the company for the previous year.

Primark Limited reported a turnover of €3.17 billion, a 34 per cent increase on last year’s figure of €2.37 billion. The company’s turnover consists of retail trading in the Republic, as well as intercompany supplies of inventory to other entities in the group, and franchise income.

The retailer said the jump in profits was largely driven by a return to more normal customer behaviour since the pandemic as all of its stores in Ireland and worldwide were now open and trading.

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With no online offering to bolster sales when Covid-19 closures were imposed, Primark Limited reported a 70 per cent fall in profits in its financial statements for 2021 to €19 million before tax.

In its latest financial statement filed with the Companies Registration Office (CRO) on Wednesday, Primark Limited said it saw “strong demand” in all of its markets upon respective reopenings. The retailer noted that full-year sales for Ireland were 34 per cent ahead of the prior year, and that the Irish business had been “trading well post-pandemic”.

While no dividend was paid in 2021 in the midst of pandemic store closures, the company has announced that shareholders will receive €475 million for the latest financial year, more than triple the dividend of €150 million paid in 2020. Shareholders’ equity amounted to €1.27 billion by September 17th, 2022, down from €1.33 billion in 2021.

Primark Limited is part of a group headed by UK-based Associated British Foods plc (ABF). As majority owners of ABF through Wittington Investments Limited, the Weston family are set to receive a large portion of the €475 million dividend. The prominent Canadian family until recently owned Brown Thomas and Arnotts in Ireland, as well as Selfridges in the UK, before selling the businesses in a €4.7 billion deal in 2021.

Primark Limited reported that its gross profit margin increased from 5.9 per cent to 18 per cent in the latest financial year, primarily due to a “sharp increase in sales densities” as Covid-19 related restrictions lifted.

Turnover from retail trading reached €693.1 million in the year to September 17th, 2022, an increase of 30 per cent on 2021 turnover of €482.2 million.

Comparing like-for-like sales, Primark Limited said that sales for the year were just 4 per cent below 2019 figures, “before any of the economic effects of Covid-19″.

The company said that a higher supply of intercompany inventory in the period resulted in an overall increase in intercompany sales, along with higher retail sales and franchise income.

However, the company noted that increased profit was partially offset by high inflation of input costs, such as for energy and labour. It also reported an increase in overheads, driven by administration expenses in recovery from pandemic-related store closures and increased trade.

Primark Limited has said it intends to invest over €250 million in the Irish market over the next nine years, increasing its selling space across the country by 20 per cent. It said it also intends to create 700 more jobs in Ireland in the next three years, adding to the near 6,500 staff already employed by the retailer here.