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Discount retailer Primark plans aggressive US expansion

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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 increase the number of its stores in America from 13 to 60 over the next five years.

The retailer’s initial forays into the US were tentative — its debut New York store was in suburban Brooklyn rather than Manhattan — and yielded mixed results.

However, better optimisation of floor space has helped improved performance, and the US has accounted for 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.

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.

George Weston, chief executive of parent company Associated British Foods, said expansion would be focused east of the Mississippi river so as to allow speedy shipment from the company’s warehouse in Pennsylvania. Primark opened its first US store in Boston six years ago.

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

“We learned who our customers are and what they wanted to buy,” said Weston, adding that stores in less affluent areas tended to outperform more notably than in Europe.

The company said its wider store expansion programme would take its total estate to 530 from 399, with new openings outside the US 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 £2bn in lost sales during lockdowns. Revenues for the 12 months to September 18 were £5.59bn compared with £7.79bn for the same period in 2019.

Adjusted operating profit was £321m, down 11 per cent from last year and far shy of the £913m reported in 2019. But the company said a patchy recovery in the final quarter was now becoming more solid.

Autumn/winter ranges are selling well and the company expects lost sales to be fully recouped this financial year with operating margins recovering to above 10 per cent.

Primark will also relaunch its website in the UK, though it will not be transactional. Weston said the upgrade would better connect the site to the group’s 9m Instagram followers, showcase more ranges and allow customers to check local availability of products.

“But we still want people to come to the stores to buy them . . . we are a bricks-and-mortar retailer.”

Elsewhere, profits at AB Foods’ sugar business increased 75 per cent, helped by better European pricing as wet weather reduced harvests along with a better performance from its Illovo operations in southern Africa.

Shares in the conglomerate were up 6 per cent to £19.71 in morning trade, reflecting the improving sentiment around Primark and the declaration of a 13.8p a share special dividend alongside a 20.5p final payout.

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