Matalan hit by need for extra discounts
Matalan’s latest quarter was hurt by the need to discount more deeply than usual as it worked to clear the spring product that had been stuck in stores during lockdown.
The 13 weeks to August 29 saw total sales dropping 3.9%. This may not have seemed bad in the circumstances, but the steep discount drive meant EBITDA plummeted 44% to £28.5 million.
Chairman Steve Johnson said its “key focus during the summer was selling-through the surplus seasonal stocks that we brought out of the lockdown period,” and it managed to achieve its aim.
It exited the season “with a healthy terminal stock position, comparable with previous years”. And it had plenty of cash available to it, ending the quarter with net cash of £162.3 million.
It all means it’s well positioned “to recover our full-price sales mix in the autumn/winter period”. That said, its ability to do that will very much depend on what happens with the second wave of the pandemic in the UK. New semi-lockdown restrictions in certain parts of England started on Wednesday. And there’s talk of more restrictions in London being imminent, as well as calls for a second, short “circuit-breaker” lockdown nationwide.
But the company goes into the autumn — whether a lockdown happens or not — with a healthy cash position, having raised new funds in June.
Johnson said this gives it headroom to normalise its working capital position” as we enter what will be another volatile and challenging trading period.” And he conceded that consumer behaviour will be under pressure in the next few months.
It means the firm is staying cautious for AW21, although it’s confident around its “robustness since trading in stores resumed”.
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