Discount retailer sees first quarter sales surge – and reveals new growth plans

Out-of-town discount retail group Matalan recorded a surge in first quarter sales, driven by its reopening programme as part of pandemic-easing measures.

And it revealed a shake-up to shift the group’s focus towards becoming a “truly multibranded omnichannel lifestyle retailer”.

In the 13 weeks to May 29, the Knowsley-based group achieved total revenues of £221.8m, compared with £75.3m in the same quarter last year which was affected by lockdown measures.

EBITDA profit, post adoption of IFRS16, was £41.8m, compared with a £10.2m loss last year.

Restated EBITDA profit, under IAS17, was £15.9m, against a £35.8m loss in the corresponding period a year ago.

The group reported a strong closing cash position of £141.8m, compared with £40.9m.

Executive chairman, Steve Johnson, said: “In line with government guidelines, our stores reopened throughout April to a high level of pent up demand, with the response from customers to our convenient, large and safe shopping environments being extremely positive.

“As a result, stores have traded well and, coupled with our online channel continuing to deliver strong growth, our performance across April and May was also ahead of the corresponding period two years ago.

“A key focus for us during the spring was not only to welcome customers back into our stores, but to sell through the large volume of residual winter stock we carried over into the year. We achieved our objective of cleansing our stock mix by the end of May as well as getting an enthusiastic reaction from customers to the new ranges as they landed.”

Ladieswear was notably strong as customers sought fresh spring looks after several months of lockdown with new dress ranges getting a particularly great reception, Mr Johnson said.

He said the group is pleased with the customer response to its stores re-opening, but added that the profile of demand continues to be volatile with ongoing uncertainty regarding the impact of the removal of the remaining COVID-19 restrictions, and what will undoubtedly be a tough retail and economic landscape this winter.

Coupled with a choppy inbound supply chain, as territories around the globe continue to manage their own response to the pandemic, this means Matalan remains cautious and measured in its planning for the months ahead.

Mr Johnson said: “Whilst our priority remains this immediate period of recovery, we have also developed an exciting growth plan that builds on our strong existing apparel-led proposition and transitions Matalan into being a truly multibranded omnichannel lifestyle retailer.

“This strategy represents a customer-led and multi-year evolution, taking what is already great about Matalan and driving the core business forward, building our capabilities, unlocking new growth and repositioning our brand.”

He revealed that the initial focus will remain close to the group’s core proposition, with detailed customer research and segmentation showing that it has clear opportunities both to appeal to new and existing customers with a wider offer in fashion and to significantly broaden its home offer into new and adjacent categories.

In the near term this will be achieved by utilising the group’s exceptional design and direct sourcing capabilities to refresh and extend its proprietary own label offer, as well as gradually introducing more carefully selected third party partnerships both in store, but particularly online. In doing so, Mr Johnson said Matalan will always retain its absolute focus on delivering outstanding value for money for customers.

He said: “Our plan also ensures that we invest in and develop our supply chain and digital capabilities further in order to both enhance our customers’ experience and to boost our own operating agility and efficiency.

“One of the most tangible and visible steps on this journey is the introduction of greater automation into our Knowsley warehouse which will see phase one complete later this year, providing significant additional online capacity and improved service for our customers. Less visible, but equally important, we are already well progressed in developing the first phase of ranging opportunities ahead of them landing for customers early next year.”