Cut-price fashion chain Primark on Thursday makes its most ambitious international expansion yet, moving into the lucrative, but notoriously treacherous, US market with the opening of a 77,000 sq ft, four-floor flagship store in Boston.
Boston was chosen by Dublin-based Primark as its entry point into the US because of the city's long-standing Irish connections. Trading as Penneys in Ireland, but known as Primark elsewhere in the world, the chain opened its first store on Mary Street in Dublin almost half a century ago.
Parent company Associated British Foods has managed to secure a landmark site in Boston, the architecturally-important Burnham building. That provides another historical link. Constructed in the early 1900s, the building was home to the famous Filene's department store and its American architect Daniel Burnham also designed the Selfridges store in London's Oxford Street.
Like ABF, which owns Primark/Penneys, Selfridges is controlled by the Weston family.
ABF has clearly taken great care in choosing its first site in the United States and the new store will be declared open Thursday by Boston's mayor, Marty Walsh, amid much razzmatazz. Another store will open in Philadelphia before Christmas and a further half dozen or so are planned next year, all located in the northeast of the country.
Primark, which has a chain of almost 300 stores, has been one of the stand-out success stories in the retail sector in recent decades – although sales growth slowed in the difficult UK market last year, underlying growth was a respectable 1 per cent and the business says it continues to take market share from its high street rivals.
New stores
Total sales, boosted by new store openings, were up by 13 per cent, as the chain added one million square feet of selling space in the last 12 months, with France singled out as its most successful new market.
But how will Primark fare in the cut-throat retail market across the Atlantic? So many companies have tried and failed to conquer the stores sector stateside that it’s become known as a retail graveyard. Notable British casualties include Marks & Spencer, Tesco, Dixons, WH Smith, Laura Ashley and HMV, to name just a few.
Primark has certainly not rushed in. It has been planning its move for some years and will be acutely aware of the fate suffered by its rivals, most recently grocery giant Tesco. It will be able to draw on its successful expansion into continental Europe, where it has a growing network of stores, in Germany, France, Spain, Portugal, Belgium and the Netherlands. It will open in Italy next summer.
Some analysts fear, though, that by waiting so long to mount its US assault, Primark may have left it too late to succeed in a market that is rapidly moving online. Others are more optimistic, predicting that the US adventure will be a resounding success and could see Primark’s sales and profits double over the next five years.
ABF is keeping its feet on the ground ahead of tomorrow’s opening and admits that it expects to make some mistakes in America as it gets to know the market and the shopping habits of American consumers, but says that it will learn from them swiftly.
The US fashion market is large, but crowded and highly fragmented, and Primark will be up against some of the same competitors it goes head to head with in Europe, – such as Zara, Top Shop, H&M and TK Maxx, which trades in the States as TJ Maxx.
Unknown
The Primark name is unknown across the Atlantic but the Irish-based retailer is banking on its “bright and buzzy” stores, rock bottom prices, fast-fashion ranges and catwalk copies drawing in the crowds as they have done in Britain, Ireland and across the continent.
Over the years the Weston family has resisted repeated calls for the Primark to be demerged from the rest of the ABF business, which takes in Silver Spoon sugar, animal feed, ingredients and grocery brands including Kingsmill bread, Twinings tea, Ryvita and Ovaltine.
It has been rewarded with an exponential profit contribution from the retail chain, which now accounts for more than half the group’s annual earnings.
ABF has repeatedly made it clear it will not divest the increasingly important retail operation but, if it were to be floated, some analysts estimate it could command a value of as much as £20 billion.
Cracking the huge US market has long been the holy grail for European retailers. Primark’s success in America is certainly not assured, despite the time and care with which it has planned its move. But if anyone can do it, Primark can.
Fiona Walsh is business editor of theguardian.com
