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Primark prepares for power growth surge – and it’s not just about the US says analyst

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Primark could double sales and profits in just five years as the Ireland and UK-based discount fashion retailer prepares to debut in the US next month, according to analysts at Liberum. Its first US store, a 70,000 sq ft unit in Boston, is set to open next month.

But a key part of its growth potential is also its expansion in Europe with the brand having only recently set foot in Italy taking its market total to nine.

Back with the US, Primark has signed leases for eight more US stores – which will open beginning in November – in key malls across the Northeast of the country.

Liberum analyst Robert Waldschmidt says Primark owner Associated British Foods (ABS) has taken a cautious approach to its US venture, with an investment of £200m and lease deals that permit the retailer to fail quickly and move on if the launch isn’t a success.

But Waldschmidt – and many others in the analyst community – don’t expect failure. He believes the thousands of students in Boston will help to spread the word about Primark’s offer and this is something Primark too sees as a key factor in its Boston launch. But more of that later.

Waldschmidt is keen to point out that Primark’s business in mainland Europe is still young and has huge growth potential.

“We believe investors are overly focused on whether US entry is successful and are ignoring the fact that Primark’s Continental roll-out is only getting started,” Waldschmidt said in a note quoted by the Evening Standard.

Meanwhile, in an interview with WWD, Primark CEO Paul Marchant, said he’s feeling confident. “The US, for a number of reasons, feels like a natural fit for our brand. Boston is a great first move for us.

And the reason for that confidence? Apart from the obvious fact of Primark’s low-priced/high-trend offer, there’s the Irish connection, a big student population with Primark already having proven success among students, and a similar climate to Europe.

The company has taken over a historic former Filene’s store building, restoring many original features but is also introducing digital features and a modern feel to its debut store.

Marchant said the US stores “will give us a very good indication of how the US consumer will react to the Primark brand… As we trade in Downtown Crossing and King of Prussia before Christmas, hopefully we learn our lessons very quickly. We want to get the eight stores opened, get through 2016, and make an assessment on our next move.”

A couple more US stores may be added to the list soon, but the firm is “absolutely in research mode, looking at the total US market to understand it as much as we can.”

He also said raising brand awareness in the US will be a challenge given the low brand recognition compared to Europe but the signs are good: “We are number one in terms of units of clothing, footwear and accessories combined in a number of the markets in which we trade. We are number one in the UK, Ireland, Spain and Portugal.”

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