UK value clothing retailer Matalan has posted a drop in third-quarter sales as CEO Jason Hargreaves says consumer confidence and spending remained depressed throughout the autumn/winter season.
In a trading update today (20 January), Matalan said for the 13 weeks to 30 November 2019, total revenue amounted to GBP311.7m (US$404.9m), down 1.2% from GBP315.6m in the equivalent period a year earlier.
EBITDA was also down, falling to GBP33.7m in the third quarter from GBP40m a year ago.
However, Matalan has posted a rise in sales for the festive trading season, boosted by online sales growth.
Total revenue for the peak five-week trading period to 4 January 2020 totalled GBP134.3m, up from GBP133.5m last year. The retailer reported online sales growth in the festive trading season of 25%.
“The challenges faced by ourselves and the wider market have been well documented and our results released today continue to reflect that backdrop, said Hargreaves. “Consumer confidence and spending remained depressed in the midst of unprecedented levels of political uncertainty throughout the autumn/winter season.
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“Following an extremely poor market in September, described by the British Retail Consortium (BRC) as the worst on record, the actions taken to further strengthen our proposition are starting to positively impact. The scale of margin investment required to manage stocks and trade effectively is reducing and I am confident this progress will continue as there will not be any material stock hangover.”
Sofie Willmott, lead retail analyst at GlobalData, notes 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.”
Willmott adds although the reporting periods are not directly comparable, two of Matalan’s family-focused competitors, Next and Primark, delivered a better performance over Christmas.
“As Next’s online channel accounts for over half of the retailer’s total sales now, it significantly contributed to positive total growth. Matalan should continue to invest in its online proposition to increase its online penetration in order to protect future overall growth. Missing basics that shoppers would expect to see now such as third-party pickup collection options, to a local newsagent for example, must be introduced, alongside a delivery saver scheme which would be relevant for those that buy across product categories and would drive loyalty. Matalan should also consider fulfilling online orders from store stock, as other retailers are starting to do, to improve sell-through rates, fill gaps in online availability and ultimately improve profitability.”