Budget clothing retailer Matalan Plc on Tuesday reported a 23 per cent slide in first half profit from the year-ago period but said demand for its current fashions is strong.

The operator of 160 stores said its pre-tax profit for the six months ended August 30 fell to £41.2 million from £53.6m in the same period of 2002 although turnover edged up 3.1 per cent year-on-year to £508m.

Matalan said same-store sales for the first five weeks of the second half climbed 5.7 per cent having slumped 6.7 per cent in the first half when it was hurt by stocking mistakes which restricted customer choice.

Group chairman, John Hargreaves, said in a news release today: "The results for the last six months have been disappointing with profits below last year's level.

"The board believes that the majority of actions needed to deliver a credible Autumn/Winter season and onwards have been implemented and expect these to contribute to a stronger performance in the second half of the year."

He added: "Early results are encouraging with Matalan Retail's sales for the five weeks ended 4th October growing 16.2 per cent overall and 5.7 per cent like-for-like, driven by new Autumn/Winter ranges and more effective marketing spend. Gross margins are as planned."

In June, Matalan was forced to quash speculation US retail goliath Wal-Mart Stores Inc was planning a £1 billion takeover bid following speculation in a couple of newspapers.