John King: While suitors measure up Matalan, its chief is counting the Christmas takings

'We're not cheap, the high street is expensive.' The retail boss tells Abigail Townsend how he succeeded where others failed

Life hasn't exactly been easy for John King since he took over as chief executive of the discount retailer Matalan. This time last year, a dire Christmas led to the second profits warning in as many months. Shares fell as analysts muttered darkly about whether Matalan's boss would be the latest City chief to get the boot. Then there was the January sale: with a stack of goods to clear, discounts were sky high - and it dragged on until the end of February. And just to round things off, come the summer, King was admitted to hospital with suspected pleurisy. ("It was a cough," he retorts now.)

This time round, however, it is a different story. The hoped-for signs of recovery started filtering through in the second half of 2004, and this Christmas, Matalan succeeded where others failed. Despite the British Retail Consortium dubbing it the worst festive period for more than a decade, Matalan revealed last week that its underlying sales were up 5.3 per cent in the 10 weeks to 8 January, above forecasts.

"It was like winning a rugby match three-nil," muses King, 42, who is a London Irish fan, of the tough period since Christmas 2003. "It was a year when we were focusing on putting the basics right, and you cannot change that overnight. But we knew what we needed to do."

Yet King's boisterous year was not just about the ups and downs of trading. There has also been bid speculation to contend with. Back in January last year, The Independent on Sunday tipped Matalan as a share to watch for two reasons: it would either get its act together or, more feasibly, it would be taken over. Rumoured suitors range from the giant US retailer Wal-Mart, owner of Asda, to New York buyout firm Kohlberg Kravis Roberts. The shares have jumped - but, as yet, the speculation remains just that.

King refuses to be drawn on the long-term plans of Matalan's chairman and founder John Hargreaves, who owns around 52 per cent of the company. "John made a statement a couple of years ago that he is committed to getting this business back on track, and that hasn't changed," he says. That isn't exactly a denial of potential sale plans, but King won't elaborate. Remarking that the official line is always "no comment", he adds: "It can be a distraction, so we just ignore it."

King speaks highly of Hargreaves, despite his erratic reputation: at the time of his appointment in 2003, King was the third chief executive in seven years. "There's a difference between the perception and the reality," he argues. "The truth is that he's incredibly supportive, he's passionate about the business, but he's not involved on a day-to-day basis. He knows what he wants the business to achieve and our goals are the same."

These include nailing down the recovery and then going for growth again. This year the underperforming jeans brand Lee Cooper will be sold, the refurbishment of the retailer's estate will continue and new outlets will be opened. King believes there is room for another 50 or 60 stores, mainly in the south of England.

He is also looking to improve Matalan's membership scheme, having already scrapped the £1 joining fee. "We need to increase the value to the member," he adds. "Should it be more of a loyalty card, or something over and above that?"

King is devoted to discount shopping. Holding his jacket lapel, he says the £65 suit he is wearing would have set him back £129 had he bought it at Marks & Spencer. "This is value. It's a good-quality product at a great price. People often say that value means cheap, but they are mistaken. We're not cheap, the high street is expensive.

"When I started at M&S [in 1986, as a merchandiser], clothing was an investment. But now it's much more disposable. People want to spend their cash on holidays and going out."

He is equally unfazed by the growing competition, the very thing that knocked Matalan off course two years ago. "I would move all our stores next to supermarkets if I could, because you benefit from the traffic. Everyone does their shopping once a week and supermarket customers will come to us because we have bigger ranges and wider choices. Just as on the high street, you don't go into only one store - there's room for all of us."

King started in retail as a management trainee at J Sainsbury, before moving to M&S, so he knows a thing or two about changing trends. Likewise his time at the clothing supplier Baird: M&S axed the supplier, prompting scores of factory closures and 6,500 job losses. King recalls driving to a Welsh town, already hit by pit closures, and "standing on a sewing machine in a room of 500 people telling them they no longer had a job". By the end of the day, he had told 2,500 staff they were out of work. "I'll never forgive M&S for that."

Born to Irish parents in west London and educated at a grammar school in Harrow, King now lives near Chester and Matalan's Skelmersdale head office. Having tried marriage once, unsuccessfully, he is happy with his girlfriend. He also looks happy about the current state of affairs in the office and is optimistic for the coming months.

However, Matalan is not out of the woods yet. Its festive performance was not, for example, universally lauded: ABN Amro, among others, pointed to weak comparatives with that dire 2003 Christmas. The ABN note continued: "In the context of its own recovery, we continue to view the progress as unconvincing."

Knitwear and footwear sold strongly last year but gifts were disappointing, and King admits to mistakes with the range. "I don't want to see any more soap on a rope in a basket, or bloody tissue-wrapped stuff, because people don't buy that any more. My nephews and nieces asked me for money to spend in the sales. People have lists, saying I want that DVD or whatever. They don't want knick-knacky stuff."

Instead, says King, gifts under the Christmas tree in 2005 will be clothing, such as ribbon-wrapped bathrobes and pyjamas, and stocking fillers. Which is when he starts doing a goat impression. One of Matalan's best sellers this year has been a toy goat that sings "Loverboy" by Billy Ocean (King is providing a rendition). Driving to work one morning listening - rather bizarrely for a man in his 40s - to Radio 1, he heard DJ Chris Moyles talking about said goat. So King sent him 12, inspiring Moyles to play a chorus line on air.

No one doubts that Matalan's recovery is still far from guaranteed. Nor can anyone say for certain that Hargreaves won't sell up. Nor, indeed, that King's job is 100 per cent safe. Yet anyone who has an eye - or in this case, ear - for that sort of publicity, the very sort you can't buy, should probably be fairly optimistic about lasting the distance.

BIOGRAPHY

Born: 1 June 1962.

Career

1982: management trainee, J Sainsbury.

1986: menswear merchandiser, Marks & Spencer.

1988: managing director of cleaning goods specialist Goulds.

1993: joins clothing supplier Baird, first as commercial director and then managing director of womenswear and lingerie.

1999: chief operating officer of clothing supplier Delta USA.

March 2002: chief executive, Lee Cooper jeans.

October 2002: trading director, Matalan.

March 2003: chief executive, Matalan.