Discount retailer Primark plans aggressive US expansion

Discount clothing retailer Primark is embarking on an aggressive US expansion, betting that it can succeed in a hugely competitive market that has humbled many UK retailers.

Emboldened by a growing awareness of its brand in the US, Primark said on Tuesday that it intends to grow its number of stores in America from 13 to 60 over the next five years.

The retailer's initial forays into the US – its debut New York store opened six years ago opposite a bus terminus in Brooklyn – were tentative and yielded mixed results.

However, better optimisation of floor space has helped improved performance, and the US has been home to almost a third of Primark's new store openings over the past year. The newer stores have also been in higher-profile locations, including the vast American dream mall in New Jersey and a site on Chicago's State Street.

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Same-store sales in the US were up 6 per cent over the past year, as bricks-and-mortar retailers opened up rapidly after coronavirus shutdowns.

"With our current portfolio trading really well, it feels like we've established a strong foundation from which to accelerate our expansion in the US market," said Paul Marchant, chief executive of the Dublin-based retailer.

“The team is working hard to convert the sizeable growth potential we see in the market into more new Primark stores - and more loyal Primark customers,” he added. Three new leases have already been signed for locations in New York state.

Pandemic

Tesco and Marks and Spencer are among the UK retailers to have been foiled in their past efforts to crack the US market. But more recently, retailers such as JD Sports and Watches of Switzerland have enjoyed impressive results from their US operations.

The US is at present Primark's seventh-largest market by store numbers. The company said its wider store expansion programme would take its total estate to 530 from 399, with new openings on this side of the Atlantic concentrated in Iberia, Italy and eastern Europe.

Primark’s reliance on stores was a hindrance during the Covid-19 pandemic, with its lack of an online channel costing it £2 billion in lost sales during lockdowns in the 12 months that ended on September 18th.

The group, which is owned by London-listed Associated British Foods, said on Tuesday that its same-store sales were 12 per cent lower than two years ago in those locations that were permitted to open, reflecting lower footfall in city centres.

Adjusted operating profit was £321m, down 11 per cent from last year and far shy of the £913m reported in the 12 months to September 2019.

But as physical shops have reopened, sales have bounced back strongly and the group expects to more than recoup the sales it lost last year, with operating margins recovering to above 10 per cent.

By contrast, online-only retailers have struggled to match the heady growth rates achieved during the pandemic and their shares have in many cases fallen back.

At AB Foods' sugar business profits increased by 75 per cent, helped by better European pricing as wet spring weather reduced harvests along with a better performance from its Illovo operations in southern Africa. – Copyright The Financial Times Limited 2021