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6 months ago
Primark sees plenty of scope to expand German business - AB Foods CFO
February 13, 2017 / 3:11 PM / 6 months ago

Primark sees plenty of scope to expand German business - AB Foods CFO

BERLIN (Reuters) - Discount fashion business Primark could triple the size of its business in Germany despite new stores eating into sales at existing ones, the finance chief of parent company Associated British Foods (ABF.L) said on Monday.

Primark has been expanding in continental Europe in the last decade as the chain has neared saturation in Britain and Ireland, putting pressure on budget rivals such as Sweden's H&M (HMb.ST) and family owned C&A.

Primark opened its first store in Germany in 2009 and the country now accounts for 22 of a group total of 328 shops. It plans to expand to 29 stores within the next two years, making the country its third biggest market by selling space behind Britain and Spain.

"You don't need to get anything close to the UK sales density to see that our German business could be much bigger. It could be three times the size of the business we've got now," John Bason, chief financial officer at AB Foods, told Reuters.

Speaking in a store on Alexanderplatz square in east Berlin -- one of the group's five busiest -- Bason did not give a time frame for tripling the business.

However, he noted that Primark now has only 1.4 million square feet (130,064 square meters) of space for a German population of 80 million, compared to 6.5 million for a UK population of 65 million.

Shares in AB Foods fell in January after it reported that Primark's like-for-like sales dropped in Germany and the Netherlands in the 16 weeks to Jan. 7, hurt by a rapid increase in selling space.

Bason said that would not stop AB Foods from expanding Primark in Germany, predicting that sales will grow at a high single digit rate in an otherwise flat market, to reach about 750 million euros (638 million pounds) this year.

"The like-for-like negatives are a reflection of the immaturity of our business in Germany," he said. "Adding space is the right economic thing to do."

SEEKING STORE SITES

H&M has grown rapidly in Germany in recent years, overtaking C&A to become the biggest clothing retailer with 459 stores and make Germany its biggest market.

Bason said the only thing holding Primark back in Germany was finding large enough stores in the right locations, although he noted it was easier than in Italy and Spain.

Primark stores are usually much bigger than those run by other fashion retailers, often sprawling over several floors and including children's wear, home furnishings and cosmetics, which are now being given more prominence near the entrance.

Bason said he had been surprised at the high sales density in Germany and the fact that people would travel as far as 100 km, even from across the Polish border, to come to a store.

"The German consumer loves value. Our price point is the real attraction," he said, adding that Germans also appreciate the breadth of the range on offer and modern store environment.

Editing by Keith Weir

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