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Trending: Brits that undercut the US clothes retailers

Primark is hitting US retailers hard, Burberry CEO takes a 75% pay cut, WPP's Sorrell under pay pressure, Devon Energy drops assets and gains an investor, and Hertz agrees to spin off its equipment unit
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Is Primark bagging America?

It is not every day a UK-based retailer can say it sells clothes cheaper than the United States. Clothes, hotels and even electronic equipment is normally lower-priced in the US.

So on Monday retail analysts are buzzing about the disruptive nature of discount retailer Primark's foray into the US market.

The average local US retailer is charging three times that which Primark prices. And that is having a major impact on consumer behaviour, analysts say.

 At present, even Wal-Mart Stores, Inc. (NYSE:WMT) is pricing its goods at 40% over that of equivalent Primark goods, according to analysts at Morgan Stanley Research.

Old Navy, owned by Gap Inc (NYSE:GPS), is next at 90% more, while Express, Inc (NYSE:EXPR) is a jaw-dropping 400% over that of Primark.

Since opening the first of eight US stores in Boston in September last year, Primark has started to bite the till receipts of the established US stores.

Analysts reckon Old Navy is one of Primark's most natural competitors. And here is the rub. While only the second cheapest to Primark, Old Navy announced last month it would be closing its Japan stores as part of a cost-cutting exercise while trying to boost its focus on the domestic US market, as well as Mexico and China.

So, Primark is in effect taking on Gap's unit in its most important space.

Analysts agree that Old Navy as well as Forever 21 - whose prices are double those of Primark - are most at risk from Primark's arrival. The segment of the retail most likely to feel under the weather in the months ahead could be the retailers geared at the teenager market.

What would be the right corporate response to such a risk? A pay cut for the chief?

Well, that's certainly how Burberry’s chief executive, Christopher Bailey, responded with a 75% pay cut after profits fell at the luxury fashion house.

Burberry Grp ADR (OTCMKTS:BURBY) said Bailey and other directors would receive no salary increase this year and that it would delay deciding on executive share plan awards by four months to November to see how efficiency measures were progressing.

Burberry US shares were down 0.13% at $15.62.

Meanwhile, institutional investors led by UK pension funds are urging shareholders to vote down a recommended £70mln pay award to WPP advertising mogul Sir Martin Sorrell. If approved, the package would take his pay to £190mln.

The Local Authority Pension Fund Forum said Sorrell’s pay deal for 2015, one of the biggest in UK corporate history, was excessive and based on questionable targets.

WPP ADR (NASDAQ:WPPGY) shares were down 0.3% at $114.81.

Elsewhere, disposals were making news.

Devon Energy Corp (NYSE:DVN) shares gained 4.7% to $37.60 after the company said it would dispose of $1bn of assets.

Devon Energy struck a definitive agreement with undisclosed parties to sell non-core upstream assets in east Texas, the Anadarko Basin and an overriding royalty interest in the northern Midland Basin.

According to the company, these transactions were subject to customary terms and conditions and were expected to close in the third quarter of the current year.

Also not doing Devon's share price any harm was news that Factory Mutual Insurance Company increased its stake in Devon Energy by 186% based on its latest first quarter regulatory filing with the SEC.

Factory Mutual Insurance Company bought 930,000 shares as the company’s stock declined 15.10% while stock markets rallied. The institutional investor held 1.43mln shares of the oil and gas production company at the end of Q1, valued at $39.24mln, and representing a $25mln injection.

Finally, Hertz Global Holdings Inc (NYSE:HTZ) shares gained 6.72% to $10.72 after the company said its board of directors has approved the planned separation of its equipment rental business into a stand-alone publicly traded company, Herc Holdings Inc. The board of new entity will be led by non-executive chairman Herbert Henkel and audit committee chair James Browning.


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