LONDON (Reuters) – The British company Primark is confident that it will break the $ 300 billion US apparel and footwear market, which has failed many other overseas retailers.
A salesman is packing clothes in a Primark store on Oxford Street in London on June 20, 201
Primark, whose trendy clothing at rock-bottom prices has taken British buyers by storm, opened in Boston in 2015 and now has nine stores in the northeast, all served by a warehouse in Pennsylvania that could service three times as many stores.
It has invested £ 250 million (US $ 313 million) in the US, has achieved a critical mass of sales, and has completed a four-year education in a crowded market that fights over abundance in the face of rapid growth -commerce growth.
Now its owner, London-based conglomerate Associated British Foods ( ABF.L ), is convinced that Primark's disciplined approach can succeed from business to business in one country, that for some British a cemetery was the largest retailers, including Marks & Spencer, Tesco and most recently Philip Green's Topshop.
"I believe the US will be a winner for Primark," said John Bason, AB Foods Finance Director, Reuters.
This trust is underlined by the attempt to create a supply chain that is closer to the US market.
Currently, Primark procures all of its garments for the US from the traditional supplier countries of China, India, Bangladesh, Cambodia, Vietnam and Turkey – a costly affair as stocks are transported across the Pacific Ocean, the Panama Canal and the US eastern coast.
It is now planned to tap suppliers from Central American countries such as Guatemala, Costa Rica and Mexico.
"With the sales levels we have already achieved in the US, we have now reached that point," said Bason, a 20-year veteran of AB Foods.
"Certainly countries in Central America will, I believe, come through soon."
Founded in 1969 in Dublin by the late Arthur Ryan, Primark trades in 373 stores in 12 countries, with sales of 7.5 billion pounds and one Sales of 843 pounds In its financial year 2017/18, the profit in millions of pounds has almost quadrupled – and all without the risk of making online purchases.
Primark, the largest British fashion retailer by number of items sold, has made a name for itself in the price and sells T-shirts and bathing suits for only 5 pounds – its customers are often loaded with its trademarked brown paper bags. This economy makes an online offer untenable.
Primark contributes more than half of the total profit of its parent company, which also owns large sugar and food companies and has a market capitalization of £ 18 billion.
Some analysts believe Primark, through its combination of value, fashion awareness and reach, could build a US-based business the size of Europe's over the next decade.
This would threaten value-fashion retailers such as the Old Navy, American Eagle and Target on their own turf, and the 102 businesses in Sweden's H & M, which operates 578 stores in the US, and the Spanish company Inditex entertain, conflict.
Primark's tenth US business will open this fall in American Dream, New Jersey, followed by a Florida deal in 2020, the first outside the Northeast Corridor. Contracts were also exchanged for a store in Chicago.
Shops in densely populated cities on the east coast in places with high visitor frequency will follow.
Bason said the decision to downsize three Primark stores – Freehold Raceway in New Jersey, Danbury Fair Connecticut and King of Prussia Pennsylvania – was critical to fine-tuning his US model.
Sales figures were maintained due to lower footprints – sales densities increased while operating costs decreased, leading to improved profitability. Conversely, the profitability of the Boston business was increased by an increase.
"When you talk about learning, that was really the key, it's the big one," said Bason.
"As you add more businesses and every business is profitable, overall profitability increases. Now you're in a positive environment. "
AB Foods announced this month that Primark has achieved strong sales growth in the US region and predicts a significant reduction in operating loss for 2018-19, reflecting the deliberate underutilization of its inventory.
"At some point … you would then place a second warehouse somewhere, strategically place it, and start adding stores from that location," Bason said. Any move to California would require a camp west of the Rocky Mountains.
"At the heart of Primark is learning about the individual market – it has always been Arthur's mantra."
coverage by James Davey; Additional coverage by Sonya Dowsett; Editing by Kate Holton and Mark Potter