Matalan moves to Q1 loss as sales slump - Just Style
Join Our Newsletter - Get important industry news and analysis sent to your inbox – sign up to our e-Newsletter here
X

Matalan moves to Q1 loss as sales slump

By Michelle Russell 21 Jul 2020

UK value clothing retailer Matalan has moved to a loss in its first-quarter and booked a slump in sales as the closure of its store estate due to Covid-19 hit results.

UK value clothing retailer Matalan has moved to a loss in its first-quarter and booked a slump in sales as the closure of its store estate due to Covid-19 hit results.

In the 13 week period ended 30 May, losses amounted to GBP53.8m (US$68.4m) compared to earnings of GBP1m a year earlier. Gross margin decreased to a negative 31.5% from a margin of 13.7% in the year ago period.

Matalan said the results reflect the impact of Covid-19, and in particular the closure of the retailer’s entire store estate as a result of the UK Government enforced lockdown, which commenced on 24 March.

Revenues were down by 72.5% to GBP75.3m in the quarter, compared to GBP273.5m in 2019.

Sofie Willmott, lead retail analyst at GlobalData, says with Matalan’s stores only open for around five weeks of the first quarter, its underdeveloped online channel has not been strong enough to carry the value retailer through the Covid-19 crisis.

“Its stores re-opened on 18 May giving Matalan a head start on its clothing rivals that could not open for another month, allowing it to test safety measures and gauge shopper interest, however demand in the last two weeks of the period will have been subdued, doing little to boost the overall quarter.”

Willmott says Matalan’s online performance has ramped up in recent years with FY2019/20 online sales rising 24% and digital channels accounting for a growing proportion of total sales.

However, she adds: “Other non-food players (such as Next and John Lewis & Partners) that have prioritised a best-in-class online experience over a long period, driving high online penetration, have been able to rely on their digital channels much more so than Matalan. Despite this, by at least having an online proposition Matalan has been able to generate some revenue, unlike value rival Primark which was completely cut off for three months owing to its lack of transactional website. Shoppers who would have turned to Primark as their first port of call normally, may have instead shopped online at Matalan for urgent purchases, such as childrenswear.”