* AB Foods' Primark to open first US store in Boston in 2015
* H1 underlying operating profit 497 mln stg, up 1 pct
* 2013-14 earnings to be held back by sugar, currency
* 2013-14 adjusted EPS to be similar to 2012-13 outcome
* Shares rise 9.1 pct, biggest one-day gain for 14 years
(Recasts, adds detail, CEO, analyst comments, shares)
By James Davey
LONDON, April 23 Primark, the fast-growing
clothing chain owned by Associated British Foods, is to
enter the United States, it said on Wednesday, becoming the
latest British retailer to attempt to crack the American market
after success in Europe.
Shares in AB Foods rose 9.1 percent on the back of the U.S.
initiative, a small rise in first half profit and reiteration of
full-year guidance. The stock was the biggest gainer in the
blue-chip FTSE index and notched up its largest one-day gain in
AB Foods said Primark, which currently trades from 271
stores in nine countries in western Europe, will open its first
U.S. store in Boston, Massachusetts, towards the end of 2015.
"Even though this will likely not move the needle in terms
of results for another three to four years ... it is definitely
a 'wow' moment," Andrew Wood, analyst at Sanford C Bernstein.
Negotiations are under way to open more stores in the north
east of the U.S. through to the middle of 2016.
"We'll open some stores, we'll start to learn, we'll see
what sort of reception we get and we'll take it from there," AB
Foods Chief Executive George Weston told Reuters.
While there have been some successful British exports to the
U.S., such as Philip Green's Topshop chain, there have been many
costly failures including attempts by Marks & Spencer
Weston said Primark's success in entering new markets
including Spain, Germany and France, where its low prices and
quick adoption of fashion trends has pulled in cost-conscious
shoppers meant it had "earned the right" to give the U.S. a go.
"The reception we received in France has been really
remarkable, that's a market that others have found difficult.
"When we went to Germany we were advised that they were
kings of discounters yet our business there goes from strength
to strength, and when we went to Spain, that was the home of
fast fashion and what did we have to teach the Spanish about
retailing - we're one of the largest retailers in that country
now," Weston said.
"We're not assuming that we'll succeed (in the U.S.) but we
do have a powerful proposition in terms of fashionability at
very low prices."
Last year Tesco, Britain's biggest retailer, ended a
six-year attempt to crack the U.S. with its Fresh & Easy grocery
chain, booking restructuring costs of 1 billion pounds ($1.68
billion). But it said last week it would try again with its F&F
AB Foods met forecasts with a 1 percent rise in first-half
profit with a strong outcome from Primark and progress in its
grocery operation offsetting a major fall in its sugar business.
The firm reiterated that lower sugar prices, as the market
adjusts ahead of EU regime reform in 2017, will mean a
substantial reduction in profit from sugar for its full 2013-14
year, while the current strength of sterling, if maintained,
would have a translation impact on full year profit of about 50
But with Primark's profit expected to be "well ahead",
improvements in grocery and ingredients and a lower interest
charge, it still expects full year underlying earnings per share
to be similar to the 98.9 pence made in 2013.
AB Foods made an underlying operating profit of 497 million
pounds in the six months to March 1, meeting forecasts.
Operating profit in sugar slumped 60 percent to 64 million
pounds. Earlier this month Germany's Sudzucker,
Europe's largest sugar processor, issued a profit warning.
At Primark, operating profit jumped 26 percent to 298
million, on the back of a 14 percent rise in sales.
Group revenue fell 2 percent to 6.21 billion pounds,
underlying EPS rose 10 percent to 45.8 pence and the firm is
paying an interim dividend of 9.7 pence, up 4 percent.
Shares in AB Foods, 55 percent owned by the Weston family,
and up 47 percent over the last year, were up 247 pence at 2,969
pence by 0927 GMT, valuing the business at 23.4 billion pounds.
($1 = 0.5944 British Pounds)
(Additional reporting by Sudip Kargupta; editing by Kate Holton
and Jane Merriman)