Primark to repay £121m furlough cash after 'record reopening sales'
Primark will repay £121m in furlough cash and hand shareholders £49m in dividends after ‘record sales’ since reopening this month
- Primark will hand back £121 million from government’s job retention scheme
- Comes despite 17% slump in sales and drop in operating profits to £319 million
- Company’s 188 stores across UK have been closed for months due to lockdown
- Owner ABF confident store sales will recover with restrictions easing
- Around 125,000 companies have returned £700million in furlough payments
Primark’s owner will hand back £121 million in furlough money claimed under government job retention schemes after the retailer saw a week of ‘record sales’ following the reopening of the high street.
Associated British Foods (ABF) said the decision comes despite stores remaining closed for most of the autumn and winter period, leading to revenues and profits plunging.
Sales were down 17 per cent to £6.3 billion and adjusted operating profits fell 50 per cent to £319 million in the six months to February 27.
The retailer however saw record-breaking sales this week with queues snaking out along high streets after non-essential stores were allowed to reopen on Monday.
Chief executive George Weston said the repayments would be made as he was confident stores will become cash generative following the easing of restrictions in England and Wales, where 40 per cent of Primark selling space is located.
Primark’s owner Associated British Foods said the decision to hand back £121m in furlough cash was because of confidence of a recovery in sales as restrictions on retail eased across Britain
He said: ‘We are excited about welcoming customers back into our stores as the lockdowns ease and are delighted with record sales in England and Wales in the week after reopening on 12 April.
‘With our success in a number of new markets, as wide-ranging as Poland and Florida, we are as convinced as we have ever been in the long-term growth prospects for Primark.’
On the furlough scheme, he said the company claimed £98 million during the previous financial year to support Primark’s 65,000 workforce.
‘A further £79 million was claimed in the six months to February 27 and up until today the amount is now £121 million,’ the company said.
Primark is one of around 125,000 employers to have voluntarily returned furlough cash that was used to help cover 80 per cent of workers’ salaries.
According to HMRC figures, this amounts to £700million of the total £57billion claimed under the scheme as of March 15.
Chief executive George Weston said the repayments would be made as he was confident stores will become cash generative following the easing of restrictions in England and Wales
Companies including furniture store Ikea, house builders Barratt and Taylor Wimpey and contractor Serco are among those that have handed back furlough money.
Halfords, who remained open as an ‘essential retailer’, said they would pay back £10.7million after experiencing ‘stronger than anticipated’ sales.
Chairman Michael McLintock added: ‘Although uncertainty remains, a large proportion of the UK adult population has now been vaccinated and last week we saw the successful reopening of Primark’s English and Welsh stores which represent some 40 per cent of our total retail selling space.
‘On the assumption that our English and Welsh stores remain open, Primark will return to cash generation.
‘Accordingly, we do not plan to make any further claims from government job retention schemes for which we would be eligible from this date, and we intend to repay the £121 million referred to above. This includes the repayment of £72 million to the UK Government.’
Last year Primark rejected a £30million government retention bonus for bringing furloughed staff back to work.
Under a scheme introduced by Chancellor Rishi Sunak, firms are being given £1,000 for every worker they bring back into work, even if the company is already up and running following the coronavirus lockdown.
A spokesman for parent group ABF said: ‘The company removed its employees from government employment support schemes in the UK and Europe in line with the reopening of the majority of its stores.
Primark enjoyed ‘record’ sales in England and Wales in the first week of reduced lockdown restrictions allowing stores to reopen, the company said. Pictured: Customers queue to enter a re-opened Primark in Liverpool
‘The company believes it should not be necessary therefore to apply for payment under the Bonus scheme on current circumstances.’
John Lewis, which furloughed 14,000 staff during lockdown, has since followed suit, declining a grant of £14 million.
Primark has also declared a dividend of 6.2p a share, worth £49 million, having scrapped any dividend payments last year.
The company said it expects to be trading from 68 per cent of selling space by the end of April.
Earlier this year, it emerged around 850 retail jobs had been lost each working day since the start of the year.
Analysis from the Centre for Retail Research (CRR) in February showed 27,096 jobs have been shed and 1,023 stores have been earmarked for closure so far in 2021.
The research, which covers insolvencies by retailers with 10 or more stores, highlights the turmoil on the high street, which has seen the recent collapses of Debenhams and Sir Philip Green’s Arcadia Group, which owned Topshop and Dorothy Perkins.
Some companies which have closed stores this year so far include up-market stationary chain Paperchase which announced the closure of 37 stores and the loss of 500 jobs in early January.
Source: Read Full Article