Primark: Next stop USA

Wed Jul 16, 2014 3:06am EDT
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By James Davey and Sarah Morris

LONDON/MADRID (Reuters) - Discount fashion chain Primark has made its mark in Europe by offering fast-changing fashion at rock-bottom prices. The secret of its success: placing huge orders for top-selling items like socks, tops and jeans and passing on the savings to shoppers.

That is the formula it hopes will help it crack the $200 billion U.S. market next year. With an initial capital investment of under 200 million pounds ($340 million) Primark plans to open a store in downtown Boston toward the end of 2015, have 10 stores in the north east of the country by Easter 2016 and build out from there.

"We're a volume business. We sell 300 million pairs of socks a year. We sell 150 million T-shirts a year. We don't have major overheads. We have a very efficient supply chain," said Primark's business development director Breege O'Donoghue.

While there have been some successful European exports to the U.S., such as Philip Green's Topshop chain, Spain's Inditex and Sweden's Hennes & Mauritz, there are several costly failures including attempts by Marks & Spencer and most recently Tesco.

If Primark can overcome the challenges of entering the market in America, where it will compete against established discount rivals Target and Forever 21 as well as players like Gap, American Eagle and Aeropostale, it could be a game changer.

"It's a big if, and that's how investors have got to look at this," said John Bason, finance director of Primark's parent Associated British Foods, which is 55 percent owned by the Weston family.

"The bull case is it is absolutely a step change, suddenly the population opportunity for Primark has just doubled – if it works. If it doesn’t work then Primark is a western European brand."

O'Donoghue thinks the move to the United States will be helped by the fact the north east of the country has a similar climate and strong cultural links to Britain and Ireland, but said Primark was also keen to adapt to a new market.   Continued...

A sales assistant packs clothes at a Primark store on Oxford Street in London June 20, 2014. REUTERS/Luke MacGregor