Matalan expects profits to improve despite drop in revenues

Matalan has revealed it expects its FY24 EBITDA of £60m-£65m, up from £30.6m in FY23, despite seeing its revenues fall in the 13 weeks to 27 May 2023 fall 8% to £263.6m.

The retailer also revealed that its revenues improved to £122.5m, up from £116.1m, in the five weeks to July 1 2023, as hot summer weather helped encourage sales.

Commenting on performance Jo Whitfield, chief executive of Matalan, said: “Building a strong leadership team to take the business forwards has been a key focus for me in my first 3 months in role. I am really excited that the team are now in place and are bringing the strength of their impressive retail experience into play as we get moving on the opportunities to underpin profitable growth.

“They have landed with immediate positive impact and are upweighting our activities and focus across the business in areas such as design, ranging, sourcing, supply chain, people and omni channel operations.The business had a challenging first quarter with cost of living pressure resulting in depressed consumer spending in discretionary categories. Unseasonal weather delayed a refresh of wardrobes for early Spring creating a tough start to the season.”

He added: “However, as the new leadership team came together and the initial changes we have made started to take effect and as the weather improved, we have been able through June to reduce the cumulative EBITDA gap to last year from £18.1m to £2.9m. We are also confident of strong year-on-year profit improvement across the remainder of the year.

“In addition to a challenging market backdrop, internal operational challenges created a gap to the market in the first quarter. We have two key areas of focus, those being driving our online channel, and improving both product choice and the strength of our price position for customers.”

The retail chief also revealed that Matalan has experienced market trends that have shifted demand back towards stores. However, in addition it has also seen its own online sales “step back to an even greater extent”.

Whitfield concluded: “Whilst recognising there is work to do, I must thank our wonderful store teams who delivered a resilient store performance during the quarter, sales within 1% of last year. This resilience strengthened through the quarter, and again into June where store growth of 15% was the driver of overall June sales growth of 6% against last year and a very strong level of profitability.

“…Last year the July to February period generated minimal profits and we are confident in a step change in year-on-year profitability in the second half of the year. This is supported by an improved and largely hedged cost outlook in relation to the key areas of freight, energy and currency. As such our full year outlook is for EBITDA in the range of £60m-£65m, driven by a strengthened leadership approach that is part of a wider program of transformation.”

Matalan currently operates 230 stores in the UK as well as 48 overseas franchises.