UK: Analysts have high hopes for Primark's US launch
Analysts believe Primark's entry into the US will increase its long-term growth potential
The news that Primark will open its first store in the US next year has been well received by analysts, with one saying it will significantly increase the UK value fashion chain's long-term growth potential.
According to Panmure Gordon analyst Graham Jones, the planned move is sooner than he anticipated, but added: "This significantly increases the growth potential of Primark".
"We think Primark's launch in the US will be successful, as it has been across a wide range of European economies, although Primark will take nothing for granted and will proceed with its typical measured approach."
He assumes Primark owner Associated British Foods (ABF) will look to open around ten stores initially giving it around 0.5m sq ft of space.
Nevertheless, Jones added, a successful launch in the US would theoretically double Primark's long-term growth potential.
"Clearly, US consumers will not be as familiar with the Primark concept as those in Europe, but we believe that Primark will be able to offer prices similar to Wal-Mart or Target, but with a dramatically superior shopping environment and fashion range."
Bernstein analyst Andrew Wood agreed the move will likely improve Primark's long-term growth potential, and added: "Even though this will likely not move the needle in terms of results for another 3-4 years (at least) and despite Tesco’s high-profile failure with its US venture (Fresh & Easy), it is definitely a “wow” moment."
The news comes less than a week after UK supermarket retailer Tesco revealed plans to open a chain of F&F clothing franchise stores in the US. It will mark the company's return to the States following the sale of its Fresh & Easy food chain seven months ago.
“The US clearly provides an important additional route for sustained growth from new store openings at Primark, whose success in moving into Europe (a graveyard for many other UK retailers) has been clear," Wood added.
McMillan Doolittle Retail Consultants analyst Neil Stern is also optimistic about the move. "It's truly a force of nature," he told just-style.
"I would assume they would do quite well in the US - the market has been very receptive to fast fashion from outside the country and Primark's price points are pretty remarkable. It'll make a splash."
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