Matalan boosted by e-sales in latest year, says it's well placed for new normal

By

Sandra Halliday

Published
Jun 25, 2020

Matalan saw its revenue rising 2.3% in the year to the end of February, hitting £1.129 billion, with the company also saying that its market share grew and that its online growth was an impressive 24%. But restated EBITDA was £80.3 million, down from £102.4 million last year.

But despite those rises, the extent of the e-sales uplift suggested that physical stores were less buoyant. And the company highlighted the tough retail climate, as well as the political uncertainty linked to Brexit and the focus on discounting at all levels of the market. This meant that profitability was under pressure as it cut prices to keep up with its rivals.

The coronavirus crisis has seen the company needing to access a £25 million government-backed credit facility, among other financial measures it has taken, but it sees its business model as well-positioned to adapt to the new normal.

Its confidence is based on that “rapidly growing and profitable online channel, and an estate of predominantly large out-of-town stores where social distancing protocols have been well implemented,” said founder and CEO Jason Hargreaves.

And those stores and its online operations are working in synergy with the company currently fulfilling orders from 75 of its shops in addition to its distribution hubs.

Analysts think this focus on growing its online business is key, saying business through its physical stores was “mediocre” last year.

Sofie Willmott, Lead Retail Analyst at GlobalData, said: “Despite an impressive first half, with Q1 and Q2 sales rising 2.9% and 11.3% respectively on the prior year, Matalan’s growth slowed from September 2019 onwards with the value-focused retailer only just delivering positive results (when comparing 52 weeks on last year) highlighting that the UK retail market was tough even before Covid-19 hit. 

“Matalan’s strong online performance in FY2019/20 helped it gear up for a greater reliance on this channel during the pandemic and although its digital proposition does not yet match up to some of its more established competitors, having a decent online offer will have enabled it to steal spend from Primark during the lockdown period.”

She also said the company has had “a head start on other clothing players with more time to adjust to the ‘new normal’ and try out safety measures, as well as gauge shopper demand, as its stores could open a month earlier than most non-essential retailers due to its homewares offer”.

This earlier opening “will have allowed it to capture spend from those unwilling to shop online and also gave Matalan an additional four weeks to sell-through summer store stock."