Matalan sales rise in Q1 but profits are flat on wet weather impact
Matalan continued to deliver a good performance, on sales at least, in the first quarter of its 2019/20 financial year, despite the comparisons getting tougher. The company saw its revenue rising by £7.6 million, or 2.9%, to £273.5 million as cautious British consumers bought into its value-focused fashion and homewares offer.
The company, which has been running attention-grabbing marketing campaigns on TV in recent periods, is benefiting from increased awareness combined with an increasingly price-conscious consumer backdrop.
That said, the company was forced to enter its clearance sale period earlier this year as it needed to shift summer stock that remained on its hands after very wet weather during May and June.
CEO Jason Hargreaves said: “Sales growth was delivered in both complementary store and online channels, with online growing by almost 30%. [But] an improvement to the awful spring weather failed to materialise until late June, the May market being one of the toughest we have seen in a number of years.”
That led fashion retail rivals to go into clearance mode a few weeks ahead of plan and meant Matalan had to respond to this. The result was the retailer’s underlying profits were flat year-on-year at £25 million.
But Sofie Willmott, Retail Analyst at GlobalData, sees the company as one of the winners in the struggling UK retail sector. ‘‘Despite coming up against strong comparatives, Matalan has continued to deliver a positive performance as its value fashion and homewares ranges appeal to consumers who are spending cautiously,” she said.
“Matalan’s product offer is well targeted to its shopper base with both clothing and homewares products nodding to current trends while being priced accessibly. Despite being a smaller player in the UK clothing market, Matalan is giving value giant Primark a run for its money, continuing to advertise to improve its brand image and using familiar faces to promote its family credentials through TV marketing. Unlike Primark, Matalan is also able to capitalise on retail spend shifting online with its digital channel significantly boosting overall performance.”
There's no denying that the comparisons were difficult this time with Q1 of 2018 having been characterised by blisteringly hot weather that meant spring and summer fashion was an easy sell.
And Matalan expects the current discount-focused environment to continue in Q2, but is hoping that the current warm weather also continues and helps to create further demand for summer ranges.
Willmott added: “With the vast majority of its stores located out of town, Matalan has an advantage over many of its competitors that are closing high street stores at a rapid rate in response to declining footfall and rising costs. As retail parks remain a more attractive shopping location with often free parking, an evolving product mix (as clothing and health & beauty players move in) and a growing number of food service options, Matalan is well positioned to weather the challenging UK retail market.”
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