The pending departure of Alistair McGeorge puts the spotlight on a pioneer of value retailing in the UK. Retail Week Knowledge Bank’s recently updated profile addresses whether Matalan, celebrating its silver jubilee, has reached maturity.
Certainly, the value sector is still growing as the performances of Primark, TK Maxx and others testify. Yet Matalan’s sales have largely stagnated for eight years now, with profits slumping in the interim. Matalan’s sales advance in 2009/10 was, though, the best for eight years at 8.2% and 6.7% like-for-like, while profits regained their 2002/03 level, raising hopes that Matalan was finally back on a roll. Yet the latest 2010/11 figures show sales growth halved, plus a margin retreat.
Over those eight years, sales momentum was lost while the main competition forged ahead, though Matalan stores increased by 40-plus units to more than 200 and trading area by approaching 30%. Consequently, sales densities dropped from almost £250/sq ft to under £180/sq ft, before edging back to £192/sq ft in 2009/10. This compares with £400/sq ft for Primark, which still has fewer stores but is catching up and has considerably increased average store size. Meanwhile, it has a medium term target of 300 stores.
The uncomfortable conclusion is that Matalan itself is not mature, but that the pioneering approach of the 1980s and 1990s have since failed to keep evolving in an increasingly competitive market. Only in the sense of lack of sales momentum is Matalan ‘mature’ - with its offer, format and store environments collectively falling behind.
As the competition has proven, there remains much more to go for, with Matalan’s management needing to achieve the hitherto elusive reinvigoration of its approach.
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