Jul 21, 2020
Matalan has tough Q1, swings to loss
Jul 21, 2020
The first quarter of its financial year wasn't a good one for Matalan with its revenue plummeting by over 70% as Covid-19 devastated its trading.
In the 13 weeks up to May 30, revenue actually fell as much as 72%, hitting a low of £75.3 million. And that meant gross profit was down 163.2% at a loss of £23.7 million, while operating profit before exceptional items fell by as much as £59.7 million to a loss of £37.4 million. The final loss for the period was £53.8 million, much worse than a profit of £1 million in the previous year’s Q1.
The company’s cash reserves were also significantly lower, having fallen from £71.2 million down to £40.9 million, although the latter amount is a much better figure than many companies have found themselves with at present.
CEO Jason Hargreaves said the scale of revenue lost from its closed stores could not be offset by its smaller online channel, even though the webstore continued to trade throughout the quarter.
The firm, which was able to start reopening from May 18 because of the homewares products that it sells, said that its larger format and out-of-town locations have been performing strongly since the reopening began.
Analysts said the figures clearly pointed to the need to boost the company’s online presence further.
GlobalData’s Sofie Willmott said: “Matalan’s online performance has ramped up in recent years with FY2019/20 online sales rising 24% and digital channels accounting for a growing proportion of total sales.
“However, other non-food players (such as Next and John Lewis & Partners) that have prioritised a best-in-class online experience over a long period, driving high online penetration, have been able to rely on their digital channels much more so than Matalan.”
But she recognised that the simple fact of having a webstore helped it pick up business that might normally have gone to rivals such as Primark.
“By at least having an online proposition, Matalan has been able to generate some revenue, unlike value rival Primark, which was completely cut off for three months owing to its lack of transactional website,” she said. “Shoppers who would have turned to Primark as their first port of call normally, may have instead shopped online at Matalan for urgent purchases, such as childrenswear.”
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