ALEX BRUMMER: Shares in Primark go up - but there is no guarantee the cheap and cheerful chain will succeed in Boston
Here is something for the record books. A British retailing group announces that it is heading for North America and the shares go up.
The manner in which Primark has successfully exported cheap and cheerful fashion to Europe should not be taken as any guarantee that the chain can repeat this phenomenal success in Boston and beyond.
Certainly, it is not impossible for UK-based retailers to succeed in the US. At the luxury end, Burberry does well and Sir Philip Green’s Top Shop, proceeding cautiously, looks reasonably set.
Heading to the US: Shares in Primark go up after it announces plans to head to the US
It is also worth remembering that M&S sold Brooks Brothers as part of a programme of returning cash to shareholders, not because it was desperate. Sir Stuart Rose always regarded the sale as a mistake.
That said and done, Primark owner ABF could still face surprises.
Setting up in the US requires infrastructure back-up, including warehouse and distribution which could mean problems from protectionist unions.
And just because Boston has a large minority of Irish origin it doesn’t necessarily mean everyone that will be rushing to the abandoned Filene’s Basement stores.
There is some evidence that European fashion can work on the Eastern seaboard.
H&M is taking up occupation in the old Filene’s store in Washington DC, its second store downtown.
The biggest difference in fashion retail in the US is that although Primark may be way cheaper than most European rivals, that can be more difficult in the US.
Heading to the US: One City commentator describes Primark decision as 'a brave move'
Even middle-market department stores are discounters with permanent sales.
A recent visit to Macy’s offered price reductions of 45 per cent on clothing. Loyalty cards offered a further 20 per cent at the till.
When I pointed out that I was from overseas, the assistant gave me the extra 20 per cent anyway.
That doesn’t happen at Next or M&S.
What is perhaps remarkable is that Primark has come through the Rana Plaza disaster in Bangladesh intact, with profits up 25.7 per cent in the 24-weeks to the start of March.
The Weston family, which controls ABF, has done more than anyone to compensate those affected by one of the most appalling industrial accidents of our time. It is to be hoped that the lessons have been learnt right through the supply chain.
Elsewhere, ABF is struggling with sugar, where profits tumbled by a whopping 60.5 per cent. The fall is a combination of both over-supply through past stockpiling and competition for Silver Spoon on the grocery shelves.
That might bring a smile to Tate & Lyle, as the company escaped sugar for other sweeteners. But
T&L’s recent struggles in the sweetener market hardly provide a better blueprint. Commodity prices are highly cyclical. Well there is a surprise.
Debt mountain
The budget deficit is the difference between two very large numbers: what the government takes in in taxes and what it spends.
It is hardly surprising it is difficult to forecast down to the last billion or so.
Nevertheless, the fact the defecit is still coming down will come as a relief to the Chancellor, who wants to show a downward trend.
The difficulty is that although there are some signs receipts may have picked up in the last month of the financial year, they have generally disappointed.
However, with more people in work, income tax and national insurance income should begin to improve. It is the spending side that is more tricky.
As the Institute For Fiscal Studies noted after last month’s Budget, of the £156billion of spending cuts required to balance by 2018-19, only £68billion has been identified.
Indeed, one of the perennial mistakes made by critics of George Osborne’s austerity economics is to suppose there has been a fiscal squeeze. The reality is Britain’s adjustment has been far less severe than in many eurozone nations.
As for the UK’s gross debt, the International Monetary Fund does not see it peaking until 2015, when debt will hit 92.7 per cent of GDP.
What may be of some comfort to Osborne is that figure is still lower than the US, Japan, the eurozone average and the G7. Phew!
Rich taste
Greggs demonstrated that there is definitely a place on the High Street for a value bakery.
Will Patisserie Valerie, founded in Frith Street in Soho in 1926, do the same for upmarket patisseries selling cakes for up to £175?
One would like to think so, but the rapid expansion of the chain under the tutelage of entrepreneur Luke Johnson and a £170million valuation could make potential investors feel a little queasy.
They may also fear that when the croissant-counters take charge, as at previous Johnson enterprise Pizza Express, the size of the cakes will shrink. Shameful.
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