Struggling value player changes tactics in tough trading conditions
Embattled budget retailer Matalan, fighting to stem haemorrhaging sales, is to turn some of its stores into even cheaper dedicated clearance outlets.

Matalan will temporarily shut its branch in Wood Green, north London, at the start of next month, re-opening a fortnight later as a clearance shop offering swingeing price reductions. It is understood that some other stores are earmarked for a similar remodelling.

Industry observers were astonished by the initiative, thought to be the first time that a value specialist has taken the clearance store route. Retail Knowledge Bank senior partner Robert Clark said: 'I have not come across this before - it's almost a contradiction in terms.'

However, a source close to Matalan said because the retailer now introduces new product more regularly, clearance stores would provide an effective method of dealing with excess.

Last week, Matalan disclosed that comparable sales fell 7.4 per cent in the 26 weeks to February 25. Clothing sales declined by 4.5 per cent like for like, or 1.7 per cent excluding goods sourced on the grey market, which the retailer is exiting to boost profitability. Homewares were especially disappointing. Clark suspected that such lines might feature in clearance shops.

Many brokers are bearish about the prospects for Matalan, which they fear has been battered by the rise of value players such as Primark and TK Maxx, as well as stellar growth of supermarket clothing sales.

But after last week's update, Evolution analyst Nick Bubb said: 'The latest problem at Matalan is the woeful performance of homewares, which is frustrating as there are signs of life in clothing and better in-store standards are helping improve customer perceptions.'

Matalan's problems have led to speculation that founder John Hargreaves, who owns 53 per cent, would take Matalan private. He is said to have held talks with three private equity firms to gauge interest in a£900 million buy-out.

Matalan is also seeking a chief executive to replace John King, who will leave later this year. However, the company's underperformance and poor track record in retaining chief executives is understood to have made the search problematic.

Matalan directors were unavailable for comment.

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