Penneys heads Stateside, but as Primark

Budget fashion chain posts operating profit of £298m for 24 weeks to March 1st

It 's a household name in Ireland, and now Penneys is planning a move Stateside, though as Primark.

The name of the Irish-founded retailer has never travelled outside the country, as American firm JC Penney had the right to its use, so Primark was born.

The budget clothing chain owned by Associated British Foods plans to open its first stores in the US from next year, providing a new avenue for growth at a business that has doubled sales in five years.

The outlets will be located in the northeast of the country, with the first due to open in Boston toward the end of next year, AB Foods said today in a statement, sending its shares up the most in more than 14 years.

Founded in Dublin as Penneys in 1969, the retailer has expanded rapidly since first venturing away from home with the opening of a shop in Madrid in 2006. Headquartered in Dublin, the retailer has stores in nine markets across Europe with annual sales in excess of £4 billion. Its products are sold in Ireland through the Penneys chain.

Primark’s US entry is “a wow moment,” Andrew Wood, an analyst at Sanford C. Bernstein, said in a note.

“The US clearly provides an important additional route for sustained growth from new store openings at Primark, whose success in moving into Europe has been clear,” Mr Wood wrote. Still, the expansion “will likely not move the needle in terms of results for another three to four years.”

Discount fashions have helped the retailer gain favour with shoppers from Berlin to Madrid and presented a challenge to competitors such as Marks and Spencer and H&M.

The first US outlet will be located on a 70,000 square feet site previously occupied by Boston’s Filene’s department store.

AB Foods chief executive officer George Weston said the Primark brand is well known to Boston’s large Irish population, adding that cultural links between Boston and Ireland make the northeast of the country an ideal testing ground for the brand.

He said the retailer plans to add “a handful of stores” between Washington and Maine. Primark is currently negotiating to open further stores in the region through to the middle of 2016.

Maureen Hinton, director of global retail at researcher Conlumino, said Primark will do well in the same cities that Topshop, H&M and Inditex have opened in as there is obviously an appetite for young fashion.

However, European retailers haven’t always succeeded in the US. Tesco exited the country’s grocery market last year after a failed six-year foray, while Marks and Spencer sold Brooks Brothers in 2001 for less than a third of the price it initially paid.

“The American apparel market is highly competitive and very fragmented so it will be interesting to watch what Primark does,” said Bernstein analyst Jamie Merriman.

AB Foods shares rose as much as 9.9 per cent in London trading, the biggest gain since March 2000. They were up 8.7 per cent at 2,960 pence as of 1.03pm.

Bloomberg