Matalan to step up price war despite profits slump

Matalan, the value retailer that issued two profit warnings either side of Christmas, yesterday insisted it had turned the corner as it pledged to step up its price war against the high street.

The out-of-town stores group, which saw its competitive advantage against high street rivals wiped out during the crucial festive season, yesterday said underlying sales had risen by 3.1 per cent during the past nine weeks. This was despite a "difficult Easter", it added. Its shares rose 1.25p to 173.25p.

John King, the chief executive, said 10 per cent lower average selling prices and better ranges helped lure customers away from town centre rivals in recent weeks. He said the company accepted that heightened price competition was "a way of life going forward". He added: "We will maintain our value proposition. If we need to cut prices, we will."

His comments came as the company revealed its preliminary pre-tax profits almost halved last year to £60.7m, dragged down by poor marketing, availability and a £5m one-off charge. Like-for-like sales for the 12 months to the end of February fell 6.5 per cent. A few years ago its underlying sales were growing by 20 per cent.

John Hargreaves, the group's founder and chairman, said the results were "deeply disappointing" but added: "I believe the building blocks for a recovery are in place."

Matalan signalled confidence in its recovery by opting to maintain its final dividend at 5.4p. This means its dividend cover for the current year will fall to just under 1.5 times. Some analysts predicted the company would slash its payout to as little as 3.7p.

Mr King said the company, which is some 50 per cent cheaper than the high street, would continue to invest in lower prices. Price deflation of about 3 per cent contributed to the group's lower average selling price during the past nine weeks, he added. He said the fact that the company's previous management allowed prices to drift up - by 4 per cent during 2002 - had contributed to its poor results last year. "That's not what value retailers should be doing," he added.

The company said it would roll out a new look for its 178 stores over the next three years after discovering that a more modern environment attracted more shoppers. Underlying sales at the three sites it has refurbished outperformed its average stores by 5 per cent during the past nine weeks.

Although the company has its eyes on 10 of the big W out-of-town sites being sold by Woolworths, Mr King said it would not "buy sites at any price", predicting the sale process would become "an auction between Asda, Boots, Next et al".

Matalan is planning to replace all three of its non-executive directors this year.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
tvGame of Thrones season 5 ep 4, review - WARNING: contains major spoiliers!
Arts and Entertainment
tvThe C-Word, TV review
Arts and Entertainment
The Ridiculous Six has been produced by Adam Sandler, who also stars in it
filmNew controversy after nine Native American actors walked off set
Danny Jones was in the Wales squad for the 2013 World Cup
rugby leagueKeighley Cougars half-back was taken off after just four minutes
Life and Style
The original ZX Spectrum was simple to plug into your TV and get playing on
techThirty years on, the ZX Spectrum is back, after a fashion
Tiger Woods and Lindsey Vonn are breaking up after nearly three years together
peopleFormer couple announce separation in posts on their websites
Life and Style
Google celebrates Bartolomeo Cristofori's 360th birthday
techGoogle Doodle to the rescue
Arts and Entertainment
Haunted looks: Matthew Macfadyen and Timothy Spall star in ‘The Enfield Haunting’
tvThe Enfield Haunting, TV review
The Mattehorn stands reflected in Leisee lake near Sunnegga station on June 30, 2013 near Zermatt, Switzerland
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living