Matalan set for better second half

Matalan, the discount fashion retailer, yesterday announced a strengthening in like-for-like sales, boosted by the early launch of its autumn collections.

Matalan, the discount fashion retailer, yesterday announced a strengthening in like-for-like sales, boosted by the early launch of its autumn collections.

The group, which is struggling to regain City confidence after a disastrous Christmas, said underlying sales rose 4.5 per cent in the six months to 28 August. Almost 1 per cent of this gain came from the decision to start selling winter coats last week.

The shares, which have been buoyed by recent bid speculation, initially slipped after the company admitted gross margins had fallen 0.2 per cent, before recovering to close up 2p at 210p.

The extent of the challenges still facing the group were underlined by the news that Lee Cooper, the jeans brand it bought three years ago, had sunk to an estimated £800,000 loss in the first half.

John King, the chief executive, blamed weak demand from France, where the brand makes more than half of its sales, for the losses. In the UK, the group regained its crown as the biggest denim retailer by volume, after ceding the title to Asda for the past six months, he added.

Mr King said the group was well set up for a better second half, pointing out that average selling prices, which were up this time last year, had fallen 5.2 per cent during the period. He said the group "was prepared" to invest more than the 2 per cent it was currently bargaining for to lower its prices further.

The company said its refurbishment programme was progressing, but it plans to put it on hold from the end of October until early next year to focus on the Christmas trading period.

New space increased by 9.1 per cent during the half-year, down from 9.8 per cent the previous year, after the new opening programme was slowed.

Mr King said the ladies and homewear ranges had got off to a strong start. "I am a lot more positive than this time last year [about autumn]," he said, adding the "teething problems" of a new distribution systems were behind them. The company was "comfortable" with analysts' full-year forecasts for pre-tax profits of about £85m.