Discount retailers have become key drivers of growth in the UK retail industry, yet a common misconception is that only the grocery industry has been affected by a consumer desire to save. This is not in any way true, as budget fashion brand Primark’s meteoric rise to success has proven – and, bolstered by success around Europe, the Associated British Foods subsidiary is now planning to expand into the US market.
Primark will launch its offensive in the north east of the United States, with its first stateside store due to open in Boston towards the end of next year. It has already signed a lease for around 70,000 square feet of commercial space in the city’s historic Burnham Building at Downtown Crossing, the previous home of iconic Boston business Filene’s Department Store.
In keeping with these plans, Associated British Foods has entered into negotiations with property magnates throughout the north east with the aim of securing further commercial retail space. Should this venture prove to be successful, a flurry of shops could be opened throughout the country by the middle of 2016.
Primark has kept its cards fairly close to its chest regarding the expansion into the US market, with a statement released by Associated British Foods only confirming that; “After extensive research, it has been decided to take the [Primark] concept to consumers in the USA.”
However, should previous forays into new territory prove to be the blueprint for this venture, it can be assumed that Primark will move into areas in which discount clothing brands have a low market saturation. This technique proved immensely successful in Germany, Spain and Portugal, although it remains to be seen whether the French market will be as receptive to the first stores opened in the country in December.
Should Primark prove to be a hit with US consumers, it will further aid Associated British Foods’ aims of greatly increasing profits in the years since the recession. Operating profits at the clothing brand climbed by an impressive 26 per cent to £298 million in the 24 weeks to the end of February, hugely contributing to the 1 per cent rise in first half operating profit reported by Associated British Foods.
During the recession, the parent group suffered losses as a result of a drop in consumer spending power – something it is still trying to recover from. Furthermore, a significant drop in sugar prices affected the first half results, meaning that Primark’s achievement was used primarily to restore balance to the group’s books.
However, the group remains adamant that the economic situation in the UK will prove beneficial in terms of full year results.
In a statement, it said; “Combined with improvements in grocery and ingredients and a lower interest charge, we continue to expect adjusted earnings per share for the financial year to be similar to 2013.”
Primark has undoubtedly become the jewel in Associated British Foods’ crown, with rising profits and growing market share building year on year. However, should this American venture prove successful, it could stand to make the group one of the UK’s most prominent retail businesses of recent years.
Do you think American consumers will react positively to Primark?
