Matalan aims to maintain unrivalled growth

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The Independent Online

Matalan, the most highly rated company in the retail sector, yesterday said it would target expansion in the UK and abroad as well as introduce initiatives, such as customer credit cards, to help maintain its reputation for unrivalled growth.

Matalan, the most highly rated company in the retail sector, yesterday said it would target expansion in the UK and abroad as well as introduce initiatives, such as customer credit cards, to help maintain its reputation for unrivalled growth.

Unveiling pre-tax profits up 72 per cent to £35m in the half-year to 26 August, the discount clothing and homeware retailer said it was poised to enter the personal finance market with its own credit card, personal loans and, eventually, insurance packages. The group plans to add 800,000 square feet of extra store space a year to sustain its growth momentum and is examining opportunities to take its value-for-money concept abroad.

Ian Smith, finance director, said: "The 60 per cent plus growth rate we are seeing at the moment will obviously drop. But we will achieve compound growth of 30 per cent over the next three years." Commenting on the company's overseas expansion plans, he said: "Europe is an obvious target."

Matalan is the sixth-biggest clothing retailer in the UK, with garment sales accounting for 82 per cent of group profits. Since March, the company has opened seven new stores, taking its total number of outlets to 111.

Asked whether he felt any sympathy for rival retailers, such as Marks & Spencer, which have lost market share to Matalan in recent months, Mr Smith said: "I have every compassion for our colleagues in the retail sector who are struggling.... But a lot of it is self-inflicted."

He described mid-market retailers, such as Arcadia, Bhs and C&A, which is withdrawing from the UK after a slump in sales and profits, as "the soft underbelly" of British retailing, adding that they have all suffered from pricing and infrastructure problems.

Mr Smith predicted that M&S would ride the storm, but said he was not convinced that others in its peer group would still be here in six to seven years' time.

Matalan's six-month profit figure included a £2.6m write-off for store development costs as well as an estimated £4m hit from the recent fuel crisis. Paul Smiddy, an analyst at Crédit Lyonnais, said: "Matalan was particularly vulnerable during the fuel protests because most of its stores are out of town... If you have got five litres of petrol in your tank, you are more likely to use them to buy food rather than clothes, however cheap they are." But he added that the fundamentals of the business remained "fantastically strong". Turnover in the six-month period was up at £256.3m, against £162m the previous year. Like-for-like sales rose by 33 per cent, whilst margins improved by 0.4 per cent.

Shares in the company closed up 53p at 703p.

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