Analysts: Primark is a 'new threat' to some US retailers

Dive Brief:

Retailers may be unprepared for the arrival of super-cheap retailer Primark in the U.S., which has opened in Boston and plans to open another seven stores here by next year, reports CNBC.
The retailer, owned by U.K.'s Associated British Foods, prices its clothes 30% lower than Old Navy, and 40% below fast-fashion retailer H&M.
Primark eschews e-commerce, though, which could make it difficult to reach U.S. consumers increasingly used to buying on all channels. Other British retailers have also found it difficult to break into the market here.

Dive Insight:

Primark’s first foray into the U.S., in a space once occupied by Filene’s Basement flagship in downtown Boston, is getting good reviews on store layout and merchandising from analysts, prompting warnings that the retailer could be a force to contend with as it grows.

Observations from Cowen & Co. retail analyst Oliver Chen and Stacey Widlitz, president of SW Retail Advisors, show that Kohl's, J.C. Penney, and Macy's would be Primark's top U.S. competitors. But because teens flock to Primark in Europe, the likes of L Brands, Aeropostale, American Eagle, and Abercrombie & Fitch, could also feel Primark’s impact, according to Widlitz.

"We view Primark as a new threat to department stores (Macy's), mothers shopping for family (Kohl's, Old Navy), and teen retailers given prices and full teen collections. Aggressive bra and sleepwear prices and children's key items may also impact L Brands and children's retailers (Ascena Retail Group and others)," Chen wrote in a note to investors on Monday.

That could get in the way of efforts by American Eagle and Abercrombie & Fitch to improve their merchandising and cut down on promotions. Primark has a vast array of choices and bottom-barrel prices that are hard to compete with.

"With [Primark] denim at $12, good luck competing. Old Navy has the most obvious overlap in terms of price points," Widlitz told CNBC.

Primark’s success will be no slam dunk, though. It’s total lack of e-commerce (beyond search — it does have a website that features a blog and many item descriptions) and its troubles with sustainability could hurt with U.S. consumers increasingly buying on all channels and concerned with sourcing of what they buy.

And, especially because of the lack of e-commerce, any great impact won’t be likely to be felt by competitors until Primark launches many more stores here. That could happen, though, Jan Rogers Kniffen, CEO of J Rogers Kniffen, told CNBC.

"They have almost 300 stores outside the U.S., and I think that they could have 300 here if the first 10 stores work," Kniffen said.

Considering that Primark is a prime choice of teens for fashion basics, the first casualty of its presence here could be American Apparel, if that retailer doesn’t go under from its existing troubles first.