Matalan cuts its cloth to boost profits despite decline in sales

Published on Friday 21 December 2007 09:34

MATALAN, the out-of-town discount retail group, managed to boost profits over its latest trading year, helped by reducing its costs.

But sales at the company, which was taken back into private ownership in late 2006, dipped 2.6 per cent to 1.03 billion.

Over the year to February 24 – which included two months as a private company – Matalan posted a pre-tax profit of 28.1 million, up 8.5 per cent from 25.9m the year before.

The group, which has outlets in Edinburgh at Seafield and Slateford, said the profit boost was down to improving margins and lower costs, with administrative expenses being cut by 15.2 per cent over the year. That meant that at operating level, the group boosted profit to 40m, from 27.4m the previous year.

The company, founded by docker's son John Hargreaves in 1985, said the retail environment "continues to be challenging".

Chief executive Alistair McGeorge said that while the past year had remained tough, the business was "well ahead of delivering our plan".

Matalan has been testing a new store format which is set to be rolled out further after a successful trial period.

Mr McGeorge said the clothing and homewares retailer's 24 new-format stores were turning in robust like-for-like sales growth while cash flow and costs were now under "far better control".

"We have invested significantly in our stores and we plan to accelerate our store investment programme in the new year," he added.

Matalan's first store was opened in Preston by Mr Hargreaves, who first discovered the out-of-town retail club concept on a visit to the United States the 1970s.

The chain now has almost 200 outlets across Britain and over its latest year boosted its payroll by just under one per cent to 13,921.

After eight years on the London Stock Exchange, the company delisted in December 2006 after Mr Hargreaves and his family bought the chain back for 817m, returning it to private hands.

Last month, Monaco-based Mr Hargreaves – who from starting his working career at 14 as a market trader selling M&S seconds has built a personal wealth estimated to be around 550m – stepped down as chairman at Matalan, citing personal reasons, and installing long-term adviser John Mills as his successor.

Hurt by competition from the likes of Associated British Foods' Primark chain, Mr Hargreaves insisted the only way to repair the firm's fortunes was to remove it from the stock exchange.

Last month, Mr McGeorge said Matalan was "seeing a lot of progress" as finances and product offerings improved.

"Financially we are well ahead of where we expected to be," he added.