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Matalan cautious after profits slump 63%

Matalan said it remained cautious on the outlook after the value fashion and homewares retailer reported a 63% plummet in EBITDA for the second quarter.

EBITDA plunged to £13.6m in the 13 weeks to August 27. Matalan blamed the tough climate, promotional activity and higher input costs.

Total revenue dropped 1.7% to £258.5m. The retailer saw online sales double.

The retailer said that September started strongly, although this was hampered by the unseasonably hot and sunny weather in the last week.

For the 26 weeks to August 27 sales fell 1.7% to £526.6m. EBITDA for the same period slumped 47% from £77.1m to £41.2m.

The retailer said the tough economic environment led to weaker footfall in the quarter, meaning Matalan invested in promotional activity to drive footfall and clear summer stock. However this teamed with higher input costs had a negative impact on margin.
Mens and kidswear continued to perform well, however womenswear remained the “most challenging” sector.

Matalan said June was a “particularly difficult month” due to Sales at competitors starting earlier than last year. But the retailer said it started to see improvements in like-for-like trading in July after implementing its ‘Line & Price’ strategy. The improvement also continued into August.

Matalan said its cash position is very strong, as it ended the period with £75.1m of cash compared with £63.8m last year.

During the quarter Matalan opened a new store in Crawley, its second opening of the year. A third store will open in Northern Ireland in November. It said its refurbished stores are outperforming the rest of the store portfolio.

Chief executive Darren Blackhurst said: “Our customers continue to tell us that our value proposition, selling higher quality low cost product, is exactly what they need as they face increasing pressures on their disposable income.”

The company said it remained cautious on the outlook due to pressure on disposable incomes and confidence levels that are unlikely to change in the near future.

Matalan said it has started to see input cost price pressures ease although it is unlikely to see the benefits this year.

Source : Victoria Gallagher – Retail Week

18 October 2011
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