Discount clothing retailer Primark to enter Italy

Fast-growing budget fashion retailer Primark plans to open its first shop in Italy next year, expanding into its tenth European market, owner Associated British Foods said on Thursday.

Primark, which contributes over half of AB Foods' annual profit, intends to open up to three stores in Italy, the first in early summer 2016 in a new shopping centre in Arese, northwest of Milan.

AB Foods' finance director John Bason said Italy was attractive because it is the second biggest market for clothing by value in the European Union after Germany.

"The research that we've done would indicate that there is a very good market in Italy for the Primark concept," he told Reuters.

Primark's entry into France 18 months ago has been its most successful so far, said Bason, giving the firm encouragement to give Italy a go.

He added Primark's planned entry into the United States was on track, with a first store due to open in Boston in September.

Shares in AB Foods, already up 9 percent over the last nine months, were 3.2 percent higher at 0800 GMT after the firm also updated on trading and said it was maintaining current year guidance.

Analysts at Barclays said the Italy move was "a reminder of the roll-out potential of Primark in Europe, which we view as a critical support to the case beyond the coming openings in the U.S."

AB Foods expects a modest decline in group adjusted earnings per share in the 2014-15 year from the 104.1 pence made in the previous year. Analysts are on average forecasting 98.3 pence, according to Reuters data.

The expected decline partly reflects movements in foreign exchange rates which have primarily affected the translation of overseas results into sterling, the full year impact of which is expected to be about 25 million pounds ($38.5 million) if current rates persist.

A bigger currency hit is anticipated in the 2015-16 year.

AB Foods' revenue for the 40 weeks to June 20 was up 2 percent on a constant currency basis and level at actual exchange rates.

Primark's sales were 13 percent higher on a constant currency basis and up 9 percent at actual rates. Sales at stores open over a year were level with the previous year.

For the full year the group expects progress at Primark and at its grocery, ingredients and agriculture businesses, offset by a large reduction in profit at AB Sugar.