Primark is taking its own brand of high street chic to Milan, home to Versace, Prada and Armani and one of the world’s fashion capitals.
The retailer – already nicknamed Primarni by fans – plans to open three stores in Italy within the next 12 months. The move comes as Primark revealed that its first US store, in Boston’s Downtown Crossing, will open in September.
John Bason, finance director of Primark’s parent company Associated British Foods (ABF), said Primark already had stores in Germany, the UK, France and Spain, and that Italy was the logical next step. Primark’s own analysis has found Italy to be the second biggest potential market for the brand in the EU, behind only Germany.
“A lot of this is about the availability of stores … Italy is just a bit more difficult,” said Bason. “Primark will do what it has done time and time again. We will open a few stores, let’s understand the variations [in the market] and then have the confidence to accelerate.” He said the Italian venture was being overseen by a completely different team within Primark to the US venture and insisted the business was not overstretching itself.
Primark has lined up eight new stores in the notoriously tricky US market. Bason said the retailer had already begun shipping clothing to its new warehouse in Bethlehem, Pennsylvania, in preparation for the opening.
In the UK, Primark’s biggest market, Bason said sales at established stores rose by between 1% and 2% in the 16 weeks to 20 June despite a cold start to the spring which has hit sales at other retailers including Marks & Spencer.
“Instead of going backwards, we have seen the strength of Primark and it has gone ahead further,” he said.
The weather had undoubtedly held back performance, Bason said, but British shoppers now had more money to spare, thanks to falls in petrol and food prices, and were putting more Primark items in their baskets on each shop.
Shares in ABF rose more than 5% to £30.78 on Thursday as Primark’s relatively strong performance in the UK, as well as in Spain, Portugal and Ireland was offset by weaker sales in Germany and the Netherlands. For the group as a whole, sales at established stores were flat year-on-year.
The retailer admitted its results next year were likely to be hit by extra running costs while it moves a UK warehouse from Magna Park to Islip in Northamptonshire. It said the rising value of the dollar, which Primark uses to buy the bulk of its clothing, against the pound would also cut profit margins.
City analysts welcomed the company’s reassurance that a good proportion of the impact of the strong dollar had been successfully mitigated by Primark’s buying teams in the terms agreed on new orders.
There was also good news from ABF’s food brands business, which has won back orders from Tesco for its 50/50 Kingsmill bread, after the supermarket cut the product as part of its plan to reduce the ranges on its shelves by a third.
However, Alicia Forry, an analyst at Canaccord Genuity, said Primark’s venture into the US could hit profit margins as it invested in a new warehouse. “While the company has invested a lot of time in analysing the US opportunity for Primark, it is not a given that the brand will succeed in that market,” she said.