Mohamed Al Fayed and his family will enjoy a £72 million dividend, thought to be their largest payout to date, after pre-tax profits at his Harrods department store rose 16.7 per cent last year.

Sales at the upmarket store in Knightsbridge in West London rose 4.3 per cent in the year to January 2006 as fine jewellery sales rose 11 per cent and women’s fashion sales increased 9.3 per cent.

While pre-tax profits rose to £22.3 million, and cash reserves increased by £10 million to £72 million, operating profits remained level at £38 million. This was partly the result of a £4.4 million increase in the pay of the highest-paid director, believed to be Mr Al Fayed, to £5 million. Mr Al Fayed personally oversaw the business for much of last year after Richard Simonin became the latest in a long line of chief executives to make a swift departure, in January 2005. Michael Ward, the current managing director, who formerly worked for the private equity firm Apax Partners, did not join until March this year.

A spokesman for Harrods said that sales had been boosted last year by investments in refurbishing departments, the popularity of a new personal shopping service, By Appointment. He said the sales improvements came as Londoners returned to the store, particularly in November and December of last year, although tourist numbers were also marginally up, despite the impact of the London bombings in July last year.

Mr Al Fayed said: “We are excited at the prospect of a very successful year, with our key Christmas and January Sale periods still to unfold.”

The retailer said that he had invested tens of millions of pounds in refurbishments last year and a similar level of investment is expected this year.

Since 1985 Mr Al Fayed has invested £400 million in the store, reclaiming about 400,000 sq ft in retail space from stock rooms and offices. About another 200,000 sq ft is in new shop floor space is expected to be claimed over the next few years.

Mr Al Fayed, who also owns Fulham Football Club, is often rumoured to want to sell Harrods and the appointment of Mr Ward this year has increased speculation.

Yesterday his spokesman insisted that Mr Al Fayed had “no plans to sell the business”, adding: “The business is here to stay and there are family behind him who can take over.”

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