Matalan reports sales fall of 9%

Matalan highlighted the tough conditions faced by the retail sector today after it said like-for-like sales had fallen 9 per cent over the last nine weeks.

Matalan highlighted the tough conditions faced by the retail sector today after it said like-for-like sales had fallen 9 per cent over the last nine weeks.

The group warned annual profits would be at the bottom end of expectations if the conditions continued, but offset some of the current weakness by announcing the long-awaited sale of its loss-making Lee Cooper jeans business.

Matalan said it had fetched £30 million for the France-based division, which it acquired in 2001 but has now sold to UK private equity fund Emerisque.

The disposal left its mark on annual results announced today, as Matalan said a write-down on its Lee Cooper investment of £27.3 million reduced bottom-line profits to £56.2 million, down from £65.3 million a year earlier.

The underlying performance was brighter, with the early results of a turnaround strategy helping Matalan post profits of £83.5 million, up 31 per cent on 2004.

In the current financial year, which started at the end of February, analysts had been looking for profits in the region of £85 million to £100 million.

Chief executive John King said current trends pointed towards the lower figure, although today's like-for-like sales dip of 8.8 per cent was offset by a 2.1 per cent increase in margins as a drive for a more profitable sales mix showed through.

He added: "In a toughening marketplace, our focus over the next 12 months is to manage greater efficiencies into the business."

Matalan has enhanced marketing, refitted stores and changed its product mix in a drive to reverse poor financial results of a year earlier.

About 30 stores in the company's 187-outlet estate have now been refurbished, with average sales at those sites continuing to show uplifts 5 per cent ahead of the rest of the chain. A further 30 stores will be improved over the next year at an average cost of £200,000 an outlet.

Mr King said a new distribution centre at Corby had improved efficiency, while initiatives to boost product availability had paid off as annual like-for-like sales improved by 4.5 per cent and total sales rose 12 per cent to £1.1 billion.

He added: "Over the last 12 months we have stabilised the business, grown profits and reduced debt. We have achieved this by delivering better value to our customers through lower prices, stronger promotions, improved quality and greater choice."

Matalan said Lee Cooper contributed £55.6 million of sales in the period, down 2.1 per cent on last year, and leaving operating losses for the division at £1.1 million - largely due to tough trading conditions in the French market.

Despite the disposal, Matalan said it had secured a licence to use the brand in its stores in the UK.