Matalan blames warm autumn for dip in sales

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The Independent Online

The recent unseasonably warm weather has triggered a sharp fall in sales at the budget clothing retailer Matalan, which held out little prospect yesterday of a quick turnaround in sales in the crucial run-up to Christmas.

Matalan, which sells low-priced clothing and homewares at 190 stores across Britain, unveiled a 10.6 per cent drop in like-for-like sales in the nine weeks to 29 October, with clothing the hardest hit, down by 7.6 per cent.

The chief executive John King was forced to deny weekend speculation that he was about to resign and admitted: "Trading conditions continue to be difficult and there is little evidence to suggest that this will improve in the near term." He added: "Where T-shirts and shorts were not selling in the cold early spring, it's the same now with knitwear and coats. I'm not blaming the weather, but it's been the warmest October in 100 years."

He reiterated that the group was focusing on profit rather than low-margin sales growth, and bought in 40 per cent less gift stock before Christmas than last year so it would have to mark down less. A spokeswoman said: "We're taking this year very conservatively. The main focus is on profitability and strong cash flow. The seasonal patterns have been extremely difficult."

She stressed that despite the drop in sales, Matalan had held on to its 3 per cent slice of the UK market. Analysts fear that results from other clothing retailers - Marks & Spencer is due to report next week - could also make grim reading. Mr King said the outlook for gross margins, a measure of profitability, was stable.

Pre-tax profits fell to £30.7m in the half-year to 27 August, from £42.5m last year, broadly in line with analysts' expectations. Matalan's finance director Phil Dutton said that if current difficult market conditions continued, he "would not be surprised" if analysts downgraded their full-year profit forecasts from the current £70m to £75m range.

Richard Hunter, the head of UK equities at the broker Hargreaves Lansdown, said: "The decline in profits was expected, but the fall in like-for-like sales comes as a further blow to investor hopes of a recovery." He said continued takeover speculation would provide some support to the share price.

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