Primark's results--via parent company Associated British Foods--revealed three things: (1) margins were back to pre-pandemic levels, which is a favorable read for retail earnings when they are reported over the next two months; (2) Shein has not been called out as a headwind in any of Primark’s markets, which suggests less disruption than some had feared; and (3) Primark’s U.S. expansion continues on plan (i.e. if Shein, or others, were an issue, Primark would be slowing).
For the period, Primark added three new stores, bringing its total to 24 stores. Interestingly, the three new locations are all indoor malls and not open centers. We show these in the table below, which are all high ranked centers.
Primark has signed new leases in Texas, Maryland, and Tennessee, which all represent new markets for the chain. The company plans to open ten additional U.S. locations each year going forward.
CEO George Weston said, “The overall profitability of our U.S. business is much higher in the first half than it was in the same period last year, and the profitability of our new stores is compelling.” One of the reasons that Primark may be not calling out competition from Shein (or Temu for that matter) is that the fast fashion market is large (over $40B) and already intensely competitive between H&M, Uniqlo, Forever 21, Amazon and others. And so, bites here and there are hard to totally attribute. Additionally, Primark historically underspends on advertising, especially digital advertising, as it uses its stores and F&F promotion to be its primary customer acquisition mechanism (viewing them as a better ROI than Instagram, TikTok, etc. As such, they don’t directly compete with Shein, Temu, Walmart, or Amazon for clicks.
