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Well-positioned” Matalan enjoys Q1 success on full-price offer, improved womenswear and online gains

Matalan was a surprise package Monday, reporting a rise in sales and earnings for the opening Q1 and an upbeat message despite tough times ahead.

Analysts previously had the UK value fashion retailer down as a potential victim of an increasingly tough economy, saddled with falling sales and a heavy debt load. Matalan has bounced back, not only with its full-price strategy paying off handsomely but with its design team praised for the strong womenswear demand, especially in the print category.

In the 13 weeks to May 27, headline news was its full-price sales jumped 21.5% as total revenue lifted a more modest 1.3% to £253.4m with its online ops performing very well.

Core earnings (ebitda) also jumped almost 38% to £22.3m.

Giving the now-obligatory “challenging market” overview, CEO John Hargreaves said the retailer is coping with consumers facing tough times due to rising inflation and general economic uncertainty. He added that Matalan is “well positioned” to benefit in such an environment, offering “fantastic design and quality at outstanding value.”

But he also cautioned that he “doesn’t expect the retail environment to improve in the near term.”

Back to the good news. He noted its womenswear offer had a “great season”, with the firm’s investment in design paying off. Its new coordinated fashion and prints offer “performed extremely well and created a great reaction across social media.”

Hargreaves also said it store refresh programme is “delivering very encouraging early results by offering customers more choice and an improved shopping experience” and will be continued through the rest of the year, eventually covering all its 227 UK stores and 25 franchise locations abroad.

He also hailed the progress of Matalan’s fast-growing online channel, helped by the introduction of next-day click & collect with extended cut-off times for customers to place orders.

Matalan said it has put major investment behind its online offer and last year saw related revenue rising over 60%. The company said last month that e-tail is bringing new customers and promised a revamped website later this year.

Last year, however, the picture was different. Matalan’s bonds were hindered by concerns over the retailer’s ability to service its £500m debt pile as footfall at its retail parks slumped over the past year.

However, Lloyds Bank granted the chain a reprieve last year by resetting its covenants, which gave it some breathing space to focus on store refurbishment while improving its design and digital offer. It is also understood that the owning Hargreaves family has been investing in the company’s bonds to improve their trading and restore faith with investors.

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