Matalan outperforms market in tough year, stays cautious on current trading

By

Sandra Halliday

Published
Jun 3, 2019

Value retailer Matalan has reported revenues and profits that outperformed the UK market in what was an undeniably tough retail climate in the 52 weeks up to February 23.

The company said that its total revenue rose 3.8% to reach £1.1 billion with full price sales rising a healthy 3.2%. Pre-tax profit surged from £20 million a year ago up to £30.1 million this time. EBITDA fell, but only slightly, from £104.5 million down to £102.4 million. The company called the EBITDA performance “stable”.

“The business has performed very well this year,” CEO Jason Hargreaves said, adding that it saw very strong underlying sales, as well as good margins, and kept costs under control, all of which “enabled us to absorb a £39 million currency headwind.”

He also said that the company’s strategy, supporting a strong core product offer, while adding extra choice and improving the shopping experience via physical store revamps and “an enhanced online journey,” all paid off.

The company continues to expect market conditions to be challenging and said it's staying cautious in the year ahead.

One analyst described the results as “commendable” with GlobalData’s Sofie Willmott saying that they “demonstrate how UK consumers are seeking value from clothing and homewares purchases at a time when non-essential spending is restricted.”

She also cited how close competitor Primark reported a similar strong performance for its H1 2018/19 period and said “both value players continue to eat away at the market share of struggling mid-market retailers like M&S and the Arcadia brands.”

But she called out Matalan’s advantage over Primark in that it’s “able to generate revenue growth online and helped by investment in its proposition, e-commerce sales rose over 30%, far outperforming the UK online clothing market which grew by 10.4% in 2018.”

She added: “Matalan has raised its game in the past year, bringing in famous, yet relatable faces such as Mark Wright and Kimberley Walsh to front its marketing campaigns, and improving the fashionability of its product offer by stocking key trend pieces at accessible price points. As it builds its reputation for providing low-cost fashion pieces alongside family wardrobe staples, Matalan should consider launching an edited range on third-party marketplaces such as Asos and Next to increase awareness and reach a wider pool of shoppers, who may not have previously considered shopping at Matalan.”

She thinks such broader accessibility online would enable it to better compete with other value brands such as Tesco’s F&F that has recently launched on Next, and New Look, which is available on Amazon.