Customers exhibited a preference for physical stores over online ordering. Credit: Shutterstock.

Despite cost-of-living pressures and disappointing weather in the first quarter, Matalan‘s CEO Jo Whitfield says it showcased impressive resilience and reported substantial progress under the guidance of its new leadership team.

She explains: “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.”

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The retailer’s revenues in the 13 weeks to 27 May declined 8% to £263.6m ($337m). However, in the five weeks to the end of June, it rose 5.5% to £122.5m from £116m in the same period last year.

Financial highlights for Matalan Q1:

  • Gross profit was £20.7m in the 13-week period ended 27 May 2023
  • Operating profits was £1.8m
  • The cumulative EBITDA gap to the previous year was reduced from £18.1m to £2.9m through June 2023
  • Store growth of 15% in June 2023 was the primary driver of the overall June sales growth of 6% compared to the previous year
  • EBITDA faced obstacles in the weeks preceding 27 May, declining to £26.1m. However, there was a slight recovery, with June figures showing an improvement to £33.6m, up from £18.8m in the same period the year before
  • Matalan expects to report an EBITDA for its current financial year of between £60m and £65m.

Customers exhibited a preference for physical stores over online ordering. “From an online perspective there has been a market trend that has shifted demand back towards stores,” says Whitfield.

She continues: “We have seen our own online sales step back to an even greater extent.

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“The business migrated to the THG Ingenuity platform at the end of March with some limited cutover disruption into early April.

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“As with any scale project of this nature, we are getting to grips with using a new platform with new functionality and are working with the THG team to learn quickly and respond with the improvements needed to both the platform and the customer offer.”

Matalan expects ‘strong’ year-on-year profit improvement

Matalan appointed former Co-op food CEO Jo Whitfield into its CEO position in March and created new supply chain and retail chief officer positions to target future growth.

Commenting on the company’s performance during the reporting period Whitfield says:

“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.

“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. Strong full-price performance from the seasonal ranges was added to by improving currency and freight costs, closing the majority of the year-on-year profit deficit from the first quarter.

“We are all committed to building a stronger Matalan and are looking forward to ensuring the business reaches its potential for profitable growth.”