Primark eyes Central American suppliers for US growth

Primark eyes Central American suppliers for US growth

James Davey

Confident it can crack the $300bn (€272bn) US clothing and shoes market where many other foreign retailers have failed, Dublin-based Primark — which trades in Ireland as Penneys — is ready to raise its bet on the country by securing new sources of fast fashion in Central America.

Primark opened in Boston in 2015 and now has nine stores in the US north-east, all served by a warehouse in Pennsylvania that could still serve three times as many stores. It has invested $313m in the US, achieved a critical mass of sales, and has a four-year education under its belt on a crowded market battling to stay afloat in the face of rapid e-commerce growth.

Now its owner, London-listed conglomerate Associated British Foods (ABF), is convinced that Primark’s disciplined store-by-store approach can succeed in a country that has been a graveyard for some of Britain’s biggest retailers, including Marks & Spencer, Tesco, and most recently Philip Green’s Topshop.

“I believe that the US will be a winner for Primark,” John Bason, ABF’s finance director, said.

That confidence is underlined by a move to create a supply chain closer to the US market. Primark currently sources all its clothes for the US from its traditional supplier countries of China, India, Bangladesh, Cambodia, Vietnam, and Turkey — a costly exercise as stock is freighted across the Pacific, through the Panama Canal and up the US eastern seaboard.

The plan now is to tap suppliers from countries in Central America, such as Guatemala, Costa Rica, and Mexico.

“We’re getting to that point now, with the sales level that we’ve got in the US already,” said Mr Bason. "Certainly countries in Central America, I think, would really start to come through,” he said.

Primark contributes more than half of the total profit of its parent, which also owns major sugar and grocery arms and has a stock market value of £18bn (€20.4bn).

Some analysts believe Primark’s combination of value, fashionability, and breadth of range, means it could build a US business over the next decade as big as its one in Europe.

Reuters

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