Booming Matalan to invest in online sales

BUDGET fashion retailer Matalan reported a leap in profits yesterday and said its ambitious expansion plans are on track.

The group, which abandoned a sale process in February, posted a 29 per cent rise in underlying full-year profits, with sales and margins both rising.

The group, which has 12 stores in Yorkshire mostly in out-of-town locations, has an ambitious store opening programme. It aims to open up to another 100 out-of-town stores over the coming years.

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It is also planning to invest in the store group's online service.

The retailer, owned by the family of founder John Hargreaves, made adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) of 186.5m in the year to February 27, up from 145.1m in the previous year.

Matalan, which trades from 205 UK stores and three overseas franchises, said revenues increased eight per cent to 1.12bn, with like-for-like sales rising an impressive 6.7 per cent.

The growth in like-for-like sales was less than the previous year, but resilient compared with many high street rivals as hard-up consumers have turned to discount stores to save money.

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Gross margin were up 1.4 percentage points to 49.2 per cent.

Chief executive Alistair McGeorge said: "We have benefited from our investment over the last three years in our product, our stores and our people."

He added that the market remained challenging.

Having called off a process that could have seen Mr Hargreaves sell the business to private equity, Matalan completed a 525m debt capital raising in April. Mr Hargreaves was paid a 250m dividend.

Matalan posted underlying operating profits up 30 per cent to 132.9m in the year to February 27.

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The group launched a store opening plan last year, opening three new stores in Scotland, Manchester and London.

The group will open between six and nine new stores this year and up to 15 next year. It is also seeking to drive web sales.

Mr McGeorge said: "This has been an exciting year for us delivering very strong sales growth in what remains a challenging market."

He added: "We remain convinced of the continuing relevance of Matalan's offer to UK consumers and have re-commenced our store opening programme and increased our investment in our online business to reach out to new customers."

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The business, which employs around 15,000 staff, is putting the proceeds of the 525m funding package into its growth strategy

Matalan is taking custom from mid-market rivals, as it attracts younger and more affluent customers.

Despite aggressive discounting by rivals, Matalan said it has maintained its level of discounting and further improved margins.