Zara axed its Irish dividends after Covid hit

Spanish retailing chain Zara axed its annual dividend from its pandemic-hit Irish operation last year, after taking out close to €20 million in payments to shareholders over the previous two years before Covid-19 struck.

The chain, which operates from nine shops in the Republic, also appears to have received rent breaks of almost one-third from its Irish landlords to help it cope with the impact of the pandemic.

Accounts recently filed for Za Clothing Ireland, which has since been renamed ITX Retail Ireland in a group restructuring, show Zara’s Irish sales fell 16 per cent to €91.3 million in the 12 months to the end of January 2021. The financial period captures the initial two-week lockdown when Covid first hit, as well as the first four weeks of the longer winter lockdown that followed last Christmas.

Taxpayer subsidies

The accounts show that Zara claimed more than €1.6 million in taxpayer subsidies towards the wage bill for its near-370 workers. The company made a loss of almost €900,000, after a profit of €4.5 million the previous year. It paid no dividend to its Spanish parent company after the pandemic hit, after paying €8 million in the year immediately prior and €11.2 million the year before that.

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The Government recently promised to re-examine the rules of its Covid wage subsidy schemes after several other companies paid large cash dividends after receiving taxpayer help.

Rent breaks

The accounts show the payments it made on shop leases declined by €3.3 million to €7.5 million, a fall of 30 per cent in its rent. As no shops closed permanently, this suggests that it gained rent breaks from its landlords for all of the mandated Covid periods over the 12 months.

As well as the nine shops, the company also captures Zara’s online sales to Irish customers. It says a boost in its web sales helped to offset the fall in the performance of its bricks-and-mortar shops.

Zara is owned by Inditex, the world's biggest fashion retailer, founded by Spanish billionaire Amancio Ortega. Its network of about 24 Irish stores also includes the chains Bershka, Pull & Bear, Massimo Dutti and Stradivarius. A recent group restructuring to put all the stores into ITX Retail Ireland means the individual performance of each brand in Ireland will be shielded from public view in future.