MarketLine Blog

Primark expansion: The impact of Brexit on its profit margins

Primark, first established as Penneys in 1969 now has over 290 stores in Europe and the US collectively. In 2017, AB Foods the parent company of Primark has stated a further 16 Primark stores are to open across Europe and the US. Following the loss of BHS in 2016, a niche in the market was identified, a niche which Primark intends to capitalize on. Primark has been identified as the leading low-cost clothing retailer in recent years competing against the likes of ASDA and H&M. The branches in Europe were all met with success upon opening, a feat which was not entirely copied when the first store was opened in Boston, United States in September 2015. In part this shows the depth of the competition in the clothing retail market. Traction gained on Twitter and through word of mouth has strengthened the growth of Primark in the US and will continue to do so with the latest shop openings.

The Brexit vote in the UK and also the weakening pound serves to strain the profit margins of Primark, however the growing number of stores is predicted to offset the tightening margins. AB Foods has said it will buffer the losses through its margins and not pass these onto the customers. Whether this remains the case after the activation of article 50 remains to be seen. Any resulting recession which may occur from Brexit or the triggering of Article 50 is playing towards Primark’s strengths; as purse strings tighten, the low-cost alternatives are more attractive.

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