Adapting as retail changes is more important than ever, says Matalan chief executive Jason Hargreaves, reporting falling third-quarter sales and profits today.
Speaking as the retailer announced third-quarter results, Hargreaves said that the falling sales in its latest figures reflected a backdrop of “unprecedented levels of political uncertainty”. It was important, he said, to take an agile approach to selling. Its own approach would mean investing in a better experience across channels, from new and refurbished stores to an improved online journey.
Matalan, a Top150 retailer in IRUK Top500 research, reported total revenue of £311.7m in the 13 weeks to November 30 2019. That’s up by 1.1% compared to the third, 12 week, quarter in the previous year, but down by 1.2% when compared to the 13 weeks to December 1 2018. Earnings before interest, tax and asset write downs came in at £59m, under new IFRS16 accounting standards. It those standards had not been introduced, earnings for the quarter would have come in at £33.7m, 15.7% down from £40m a year earlier.
In the peak trading period, the four weeks to January 4, Matalan’s total revenue came in at £134.3m, up by 0.6% from £133.5m last year. The value clothing retailer said that online sales grew by 25% over peak trading, while Boxing Day sales were in line with last year.
“In the ever-changing landscape retailers are now faced with, it’s more important than ever to evolve and to be agile, efficient and deeply connected to our customers,” said Hargreaves. “So whilst adapting to the immediate market and responding to this year’s challenges, we have also progressed our strategy. This will continue in the year ahead. We are giving customers a better all round experience, providing additional product choice, fantastic new and refurbished store space, and a further improved online journey. Our online business is growing at a rate of 25%. Alongside this we will continue to benefit from our investments in driving operational efficiency and improving our stock management capabilities. Therefore, despite remaining cautious in a tough market, I’m confident that with the support of our colleagues we will have a stronger 2020.”
Hargreaves said that the retailer had taken action to invest in margins following the “extremely poor” market seen in September – part of a period described by the British Retail Consortium (BRC) as the worst on record. But he said its actions were beginning to see results, and that the level of investment needed in order to keep prices low, while managing stocks and trading effectively, was now reducing. “I am confident this progress will continue as there will not be any material stock hangover,” he said.
Commenting, Sofie Willmott, lead retail analyst at data and analytics business GlobalData, said: “Matalan’s accessible prices and trend-focused clothing and homewares ranges meant it outperformed the market for most of 2019 but its sales slowed from September and the value retailer only just managed to deliver a positive Christmas, despite impressive growth in its online division.
“Its rapidly growing online channel continued to boost total revenue indicating that its store sales declined, despite having four additional UK branches – 232 stores in total versus 228 this time last year. Given it can now afford to rely on its digital division more heavily as it has enhanced its proposition and clearly convinced customers to shop online, it must carefully consider whether its store estate is still needed in its current form or if it can be streamlined which may help to stem falling EBITDA.”
Image: Screenshot of Matalan.co.uk