Will expansion into the US make cents for Penneys?

Primark might be the jewel in the crown of Associated British Foods but the company has always maintained strong links with Ireland, where it was founded and remains headquartered, and where it trades as Penneys.

Little wonder, then, that the discount fashion retailer chose the Irish stronghold of Boston as the beachhead for its foray into the gargantuan US market.

In recent years, while all of Europe was convulsing from the financial crisis and consumer confidence was an oxymoron, the discounter was planting flags across the Continent.

Huge market
Conquering the US, however, will be a wholly different proposition for the retailer. Just ask Marks and Spencer, Dixons and the UK supermarket chain Sainsbury's, all of whom have tried and failed to crack the US market.

Even the mighty Tesco retreated from the US last year, taking a £1 billion writedown after having opened more than Fresh ’N’ Easy 160 outlets.

Primark will begin with a single store in Boston next year costing up to £2 million, but if that is successful, it envisages opening more stores across the northeast of the US. It says is already in negotiations with several landlords.

ABF’s chief executive George Weston, nephew of the Brown Thomas owner Galen Weston, says Primark has conducted “extensive research” for the launch.

One of the reasons that Primark has flourished in markets such as Spain and Germany is that it has been prepared to tinker with its offering and ranges, tailoring its stores to suit the local market.

The single Boston outlet will help it sharpen its offering.

Timing
The timing of Primark's move into the US is also interesting. Primark's continental European expansion has a long way to run yet. Why has the company chosen to fight an expansionary war on two fronts?

The US consumer economy is slowly reawakening after a long slumber. Perhaps Primark felt it was now or never if it is to conquer the US, before the feelgood factor really returns for US shoppers and discounters find it harder to establish themselves in the market.

A proper crack at the US market won’t come cheap, although the company, which Morgan Stanley reckons is worth more than £30 billion, can afford it.

At least it will have Europe to keep it occupied if things don’t work out for it across the Atlantic.