Associated British Foods plans to increase the expansion pace of its Primark discount chain, upping pressure on the world's two biggest fashion retailers, Inditex and H&M, in their top markets in Europe.
Primark will add a million square feet of selling space in the coming year, mostly in Britain, Spain, Germany, France and the Netherlands.
This comes after it grew 0.8 million in the financial year to September 14, to a total of 9 million or 257 stores. Primark trades as Penneys in 38 stores in Ireland.
"We're really at the very early days of expansion in continental Europe," chief executive George Weston said today. He noted that there were only 10 Primark stores in Germany - H&M's biggest market - compared to 161 in the UK.
"One day we will have 100 or more," he added, noting that Primark will open its first store in France in December, one of 13 openings it is planning in time for Christmas, including five in Inditex's home market of Spain.
Primark, which opened its first store in Dublin in 1969 under the name Penneys and launched in Britain in 1973, is focusing on growing existing markets for now, but is looking at other countries in the medium-term. Weston noted it was still not present in Scandinavia, eastern Europe and Italy.
"We're being invited into more shopping centres in continental Europe. We drive tremendous footfall," he said.
Primark, which generates almost a third of AB Foods' group sales, has performed strongly through the economic downturn thanks to its low prices and quick adoption of fashion trends.
Those low prices came under scrutiny in April after 1,129 people died in the collapse of a factory in Bangladesh, where clothes were made for brands including Primark. Last month Primark laid out plans to pay more compensation for the disaster.
Weston dismissed suggestions that Primark success was dependent on hard times, noting it also grew strongly before the financial crisis. He said it was now shifting its offering towards high fashion from discount basics as spending power recovers.
British retail sales grew slightly more strongly in October compared to the previous month, but mild weather resulted in lower clothing sales which limited overall gains, the British Retail Consortium said earlier today.
Primark said its full-year adjusted operating profit rose 44% on revenue up 22% to £4.2 billion sterling, helping AB Foods grow adjusted pretax profit by 13% to £1.096 billion on revenues of £13.3 billion.
AB Foods said it expected Primark's continued growth, along with expansion in its grocery business, to boost profits in those divisions next year. However it forecast another fall in profit at its AB Sugar business as European sugar prices drop.
Overall, the group said it expected adjusted earnings per share for the coming year to be similar to 2013.
AB Foods said it had made progress to improve the efficiency of its sugar business as the planned ending of European Union sugar quotas in 2017 puts more pressure on prices, already down due to expectations of a fourth year of oversupply.
"Sugar prices have further to fall," Weston said, without giving a concrete forecast.
AB Foods reported improved performance for its grocery unit,which includes Silver Spoon sugar, Twinings tea and Ryvita crackerbread and recorded a 24% increase in adjusted operating profit as restructuring bore fruit.