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Matalan invests online but third-quarter sales still down by a fifth

Image: Matalan/PR Shots

Matalan today shows how it has invested online over the last year to improve its sales at a time when its stores have been hit by Covid-19 lockdowns. The value fashion retailer, ranked Top100 in RXUK Top500 research, says it has improved online capacity in its supply chain while also starting to ship from store. But although online sales grew by 84% in the third quarter of Matalan’s financial year, that was not enough to stop its total sales, across all channels, falling by a fifth at the same time.

The retailer today reported sales of £244.8m in the 13 weeks to November 28, 21.5% down from £311.7m a year earlier. Total UK revenues came in at £119.2m, down from £134.3m last time, while online sales grew by 84%. Pre-tax profits of £1.7m were 81% down from £9.4m last time.

Going into Boxing Day, stock in a seasonal sale that was this year held online, was 14% lower than it was a year earlier.

In the 39 weeks to the same date, sales came in at £578.1m, 34.1% down from £877.2m last time, but at the bottom line pre-tax losses of £76.7m were down from a pre-tax profit of £0.5m a year earlier. The retailer has introduced extra liquidity to its debt management and says that although store revenues were hit during the quarter, its finances are now more resilient. 

Steve Johnson, executive chairman of Matalan, says the results reflect Covid-19 disruption to store trading throughout November, following on from “robust” trading in September and October, while the online sales channel grew as a result of the work it had done over the year to increase capacity in the supply chain while also enabling online fulfilment from stores. “This represents an important step in our ongoing journey to becoming a truly omnichannel operation”,” he says. 

He adds: “Since Christmas, the Covid-19 landscape has deteriorated significantly with all of our UK stores once again mandated to close on the January 4 for an uncertain duration. As such we remain very cautious about the months ahead and are working with our key stakeholders to manage the business accordingly, focussing on optimising online performance, cash preservation, working capital management, and minimising costs. We have swiftly taken the necessary action to protect the business. Whilst we have furloughed the majority of our store teams, we continue to fulfil online demand from many of our stores and also provide our popular click and collect service, enabling safe and convenient access for our customers to essential clothing and homeware items for themselves and their families.

“Our experience of re-opening our stores following a lockdown gives us confidence that we can once again trade well in what will undoubtedly continue to be a tough retail environment. I would like to thank our colleagues and suppliers for their continued commitment and support through another challenging period.”

Emily Salter, retail analyst at data and analytics business GlobalData, says Matalan’s online business has not been strong enough to support its total sales revenues. “Despite enhancements to its digital division and strong online growth in the five weeks ending January 2, Matalan is suffering for being a digital laggard,” she says. “In order to increase its online penetration and protect sales during the ongoing Covid-19 crisis and beyond as sales continue to shift online, the retailer must invest in its proposition to introduce missing basics. For instance, Matalan does not offer an express home delivery service, standard delivery is only free on orders over £50, and it has no third-party pickup options. A delivery saver scheme would also help drive shopper loyalty, especially for family shoppers making more frequent purchases across product categories.”

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