Matalan posts slight increase in Q3 sales
Matalan, the affordable fashion and homewares retailer, has announced a 1.1% increase in revenues for the 13 weeks to 30 November, growing from £308.3 million in 2018 to £311.7 million last year.
The year-on-year results were not entirely comparable as the third quarter in 2019 ended nearly a week later than in 2018. Compared with the same 13-week period last year, revenues grew by 2.3% to £315.6 million.
Profit figures were also skewed by accounting changes. Ebitda, post adoption of IFRS16, was £59 million, while restated Ebitda under IAS 17 fell by £6.3m to £33.7m.
Jason Hargreaves, CEO of Matalan, said the results reflected a backdrop of multiple challenges. “Consumer confidence and spending remained depressed in the midst of unprecedented levels of political uncertainty throughout the autumn/winter season,” he said.
“Following an extremely poor market in September, described by the BRC as the worst on record, the actions taken to further strengthen our proposition are starting to positively impact. The scale of margin investment required to manage stocks and trade effectively is reducing and I am confident this progress will continue as there will not be any material stock hangover.”
The expected seasonal surge in sales during the Christmas trading period failed to materialise for many retailers last year, and Matalan was no exception. Total revenues grew by just 0.5% to £134.3 million in the five weeks to 5 January.
But the retailer’s online business performed strongly, delivering a 25% increase in sales during the same period.
With about 230 stores in the UK and 35 overseas franchise stores, Matalan is a British retailer with international aspirations. The business, owned by Missouri Topco Limited, which is controlled by the Hargreaves family, is fighting hard to prevent a decline at a time of fast change in the retail sector.
“In the ever changing landscape retailers are now faced with, it’s more important than ever to evolve and to be agile, efficient and deeply connected to our customers. So whilst adapting to the immediate market and responding to this year's challenges, we have also progressed our strategy,” CEO Hargreaves explained.
“This will continue in the year ahead. We are giving customers a better all round experience, providing additional product choice, fantastic new and refurbished store space, and a further improved online journey. Our online business is growing at a rate of 25%. Alongside this we will continue to benefit from our investments in driving operational efficiency and improving our stock management capabilities. Therefore, despite remaining cautious in a tough market, I’m confident that with the support of our colleagues we will have a stronger 2020.”
According to data analytics firm GlobalData, Matalan will have to improve its online capabilities to succeed in the future. Its rivals Next and Primerak delivered a better performance over Christmas, but Matalan is seeing fast growth online, a strength it should leverage.
“Missing basics that shoppers would expect to see now, such as third-party pick-up collection options, to a local newsagent for example, must be introduced, alongside a delivery saver scheme which would be relevant for those that buy across product categories and would drive loyalty,” said Sofie Willmott, lead retail analyst at GlobalData.
“Matalan should also consider fulfilling online orders from store stock, as other retailers are starting to do, to improve sell-through rates, fill gaps in online availability and ultimately improve profitability.”
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