Matalan has reported a rise in first-quarter sales and earnings but cautioned that price-cutting is taking a toll on margins.
The value fashion giant posted a total sales rise of 2.9% to £273.5m in the 13 weeks to May 25. Restated EBITDA edged up to £25m from £24.8m in the previous comparable period, while taking into account new accounting rules on leases for the first time, EBITDA was £50.4m.
Matalan’s closing cash position was £71.2m versus £60.5m in the comparable period.
Matalan chief executive Jason Hargreaves said the performance was “solid”, and sales growth had been achieved in-store and online – the latter was up 30%.
He said “underlying margin and cost performance also absorbed a £4m currency headwind in delivering profitability in line with last year”.
However, he flagged the toughest fashion market conditions in years, which led to price-cutting which is denting margins.
Hargreaves said: “The market deteriorated significantly through the course of the quarter. An improvement to the awful spring weather failed to materialise until late June, the May market being one of the toughest we have seen in a number of years.
“As a result, the market began to discount earlier and to a greater extent than expected, and we ourselves had to react and begin promoting seasonal stocks. While having a manageable impact on the first quarter’s results, there will be more significant dilution to margins in the second quarter as we exit the summer season.
“Despite this we continue to make good progress with our strategic areas of focus. These include refurbishing our store estate, improving our online customer journey, and always looking to give our savvy customers even more choice and value.
“This customer-centric approach has made us a strong and relevant business that is well positioned within the market. While we react to immediate trading conditions, we remain confident in the longer-term direction and progress we are making.”
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