Matalan rounds off tough year

Discount retailer Matalan has reported a 30 drop in pre-tax profits last year. Total sales fell 3.9 percent to £1.07 billion and like-for-like sales dipped 6.9 percent as a result of lagging home ware sales. Pre-tax profit dropped to £56.7 million from £80.5 million, the impact of a one-off £20.4 million charge to update software, which was never completed. This may result in legal action against Matalan's advisers, Kurt Salmon Associates. "This was a difficult year for Matalan in a tough retail environment," said chief executive John King, who will stay on until year's end. "Much work has been done to improve our retail position, and progress has been made particularly in our core clothing business." The company said that clothing had seen market growth during the past year, with prices at a discount to its competitors. Clothing sales rose 0.1 percent, while overall sales fell 2.2 percent, compared with 8.8 percent last year. Matalan warned that it saw no signs of improvement, although like-for-like sales rose in March and April, relative to a weak 2005. The retailer has refocused its attention on its clothing brand, investing in a marketing campaign starring model and TV presenter Melanie Sykes. However, some analysts are not impressed. Richard Ratner, analyst at Seymour Price told The FT: "we believe that Matalan will struggle to stand still this year, with out of town customers going to Tesco or Asda, and huge competition from the in-town value players, Primark and Peacock." Meanwhile, home wares are causing full-year results to flag, as consumers became reticent about spending and the company had difficulty updating in-store ranges. Matalan has said that it will sell all its current stock before introducing new ranges later this year. It has also appointed a new home ware team.