Handelsblatt Exclusive Discount Retailer Primark to Expand in Germany

Budget fashion retailer Primark plans to open 7 stores in Germany this year, CFO John Bason said in an interview with Handelsblatt. The move adds pressure to the country's highly competitive clothing market.
Customers crowd around a Primark location on opening day in Leipzig in April 2016. Seven new stores are planned in Germany for 2017. Photo: DPA

Irish discount clothing retailer Primark plans to expand in Germany, growing from 22 to 29 branches this year and next.

The chain will open seven stores in the country this year, John Bason, chief financial officer of the chain's parent company ABF Group, told Handelsblatt. The London-based company plans to boost gross revenue in Germany to €900 million ($959 million) this year with the new stores in Berlin, Stuttgart, Bielefeld, Munich, Wuppertal, Ingolstadt and Bonn, he said.

The clothing retailer first entered the German market in 2009 with a store in Bremen. Now, with increasing competition from rivals such as OVS and C&A amid tough market conditions, Mr. Bason also indicated that Primark may shift its focus from large cities to open stores in mid-sized centers.

The German retail clothing market shrank to €62.7 billion last year, down one percent as chains suffer from high costs, excessive expansion and online competition.

 

We will be among the top ten German textile retailers when it comes to sales volume this year. Wolfgang Krogmann, Head of Primark's Germany division

Primark is betting on more Germans wanting affordable fashion. "Lower price ranges in the German retail market have expanded their market share in recent years," said Beate Hölters, a partner with the consulting firm Tailorit in Düsseldorf.

Primark's Mr. Bason has ambitious growth targets and sees enormous potential in Germany. In the U.K., with its 65 million inhabitants, Primark operates around 604,000 square meters of retail space, Mr. Bason said. By comparison,  the chain occupies just 130,000 square meters in Germany, where there are 80 million people, he said. "So there is an enormous potential for us here."

But at Primark's German stores not all the news has been good recently. Comparable sales per square meter of retail space fell slightly in the 16 weeks before Christmas. Still, Mr. Bason doesn't seem worried. “In Germany we had higher-than-average sales per square meter," he said, adding that sales had "normalized" thanks to new store openings.

Primark sells its goods as quickly as possible, relentlessly cutting prices until items are sold, Mr. Bason said. The company is betting on sheer volume.

"We will be among the top ten German clothing retailers in terms of sales volume this year," Wolfgang Krogmann, head of the company's German business, told Handelsblatt.

The company achieved a profit margin of 11 percent by skipping most advertising or sponsorship of sports clubs or stars, Mr. Bason said.

But the coming year won't be without challenges. Italian fashion group OVS is planning to open more than 100 stores in Germany this year. The company is currently investigating which of the remaining German branches of its recently acquired Swiss chain Charles Vögele can be converted into brand stores, an OVS spokesman said.

Dutch retail chain C&A also plans to invest about €1 billion to restructure the group, modernize existing stores and open new shops in the next few years. And German textile discounter Kik wants to expand the number of its retail outlets from currently 3,400 to 5,000 by 2021. Kik also has its eye on former Charles Vögele stores, planning to acquire up to 60 of them, a spokeswoman said.

This kind of competition is why Primark is adjusting its strategy to include smaller cities. "We can imagine opening stores in mid-sized city in Germany in the long term," Mr. Bason said.

 

Georg Weishaupt covers the luxury and fashion industry for Handelsblatt. To contact the author: [email protected]