Matalan today reported strong online growth in its full-year figures, and now plans to further strengthen its ecommerce business as the retailer emerges from lockdown. Online strength helped the retailer to report full-year sales growth, but could not save it from a pre-tax loss at the bottom line.
Now the out-of-town fashion and homewares retailer, ranked Top100 in RXUK Top500 research, is looking to strengthen its online and multichannel capabilities to ready it for new, post-Covid, ways of shopping.
Matalan said said that Brexit uncertainty had hit customer confidence and spending during its latest financial year, the 53 weeks to February 29. Sales of £1.1bn were 2.3% ahead of the previous 52-week year, thanks to 24% online growth – and an extra week in the financial year.
Earnings before interest, tax and asset write downs (EBDITA) came to £183m under new IFRS 16 accounting guidelines. Under the previous IAS17 guidelines, the EBITDA figures would have been £80.3m, down from £102.4m a year earlier. But at the bottom line, the retailer reported a pre-tax loss of £18.3m from a pre-tax profit of £30.1m a year earlier.
At the end of the year Matalan had cash of £61.2m, and in June put in place a £25m credit facility via the Coronavirus Large Business Interruption Loan Scheme, and raised a further £25m from bonds.
Matalan chief executive Jason Hargreaves said: “It is pleasing to have continued to grow our sales and market share over the last year with online growth particularly strong at 24%. However these results also reflect the very challenging consumer backdrop, with spending remaining depressed in the midst of unprecedented levels of political uncertainty. The market because increasingly distressed in an attempt to stimulate demand and we were required to be competitive in that regard. As a consequence, profitability was under pressure as we also ensured that we exited the year in a clean stock position at the end of February.”
Matalan invested in its website and mobile app as well as its store estate over the year, as it looked to make it easier for shoppers to buy. Online, the retailer has focused on improvements to search, payment and navigation and says this focus will continue as more of its customers shop online or across channel.
Offline, the retailer has opened five new stores – including some smaller format shops in central locations – and enabled its shops to become collection points for third-party parcels for retailers including Amazon. It also introduced in-store ordering, supported by sales staff. “This,” it said, “offers customers added speed and convenience whilst improving our cost productivity. We intend to roll this across the store estate in the coming year.
Other investments include an upgraded warehouse management system, which came into operation this spring and supports a great choice of online fulfilment options. It has also started to test RFID to fulfil online orders from stores, ad says this would “significantly increase our online capacity and reduce the fulfilment costs of the online channel”.
Looking ahead from Covid-19 lockdown
Phased reopening of Matalan’s UK shops started on March 18 – the retailer qualified as an essential retailer thanks to its homewares range – and most are now open, with “encouraging” levels of trading.
“Now, as we emerge from the Covid-19 lockdown, it is more important than ever to evolve and be agile in responding to changes in consumer behaviour in these unprecedented times,” said Hargreaves. “Our business model has proven well-positioned to adapt, with a rapidly growing and profitable online channel, and an estate of predominantly large out of town stores where social distancing protocols have been well implemented.”
He added: “The pace of change required across the market to adapt to the current environment is evident and we are confident that we are well placed, and focused, to deliver against that need to quickly progress our recovery.”
Commenting, Sofie Willmott, lead retail analyst at GlobalData, said: “Matalan’s strong online performance helped it get up for a greater reliance on this channel during the pandemic and although its digital proposition does not yet match up to some of its more established competitors, having a decent online offer will have enabled it to steal spend from Primark during the lockdown period.”
She added: “Matalan is well positioned to cope with the aftermath of Covid-19. Its out of town locations will be more appealing to those concerned about being able to social distance in potentially busier and less spacious high streets and shopping centres, with larger branches and easily accessible parking making the shopping experience easier. Additionally, as many UK shoppers trade down amidst worries about personal finances and job security, its value focussed product range will be attractive.”
Matalan sells from 231 UK stores, 37 international franchise stores and online.