Competition For Matalan Sees Profits Fall

Matalan, the UK clothing discounter, has reported a fall in profits for the year to end February. Like-for-likes are up by 3.1 per cent over the nine weeks to May 1, compared to 6.5 per cent decline across the year to February 28. Turnover for the year was £1,048.3m, with pre-tax profits almost halved to £60.7m, compared to £117.4m a year ago.

Matalan has seen increasing competition for sales, with both Tesco and Asda growing clothing market share, as well as strong offers from rival discounters such as Peacocks and Primark. Across the year, retail sales increased by 2.8 per cent, with the group opening 15 stores across the year to bring its total to 178. Matalan said summer sales were affected by 'poor choice, weak marketing and a ladieswear range that failed to meet the needs of our core customer'.

In the second half, sales of higher priced lines including winter coats, jackets and knitwear were disappointing. Sales in November were affected by significant discounting as many UK retailers moved to clear sluggish winter lines.

Matalan founder and group chairman John Hargreaves said: "Last year was a difficult one for Matalan, and the results produced by the group are deeply disappointing, however I believe that the building blocks for a recovery are in place." Along with changes to its buying teams and improved products ranges, Matalan has boosted the timing and content of its regular direct mail communication with its 10m active customers.

Since the start of the new financial year Matalan has seen total sales growth of 13.2 per cent, despite difficult trading over Easter. The retailer said it is pleased with the progress made in ladieswear, kidswear and home, but menswear, where its own Lee Cooper brand is a key offer, remains disappointing. A new menswear buying team in now in place, complementing a new womenswear team recruited last year.

Trials are underway at three stores to establish a new format for refurbishing older stores in the chain. Like-for-like sales in these trial stores have outperformed the company average by at least 5 per cent. Group chief executive John King said: "Our objective has been to establish the right platform from which we can grow the business in a sustainable way. We still have much to do, but we are in better shape now than a year ago, and the actions we are taking are starting to bring improvements."