Discount retail chain Matalan failed to meet the high expectations of the City today – despite strong sales and further shop openings.
Shares in the group slipped 13p to 517p following a trading statement which showed pre-tax profits set for the lower end of market forecasts. Matalan said the figure for the year to 24 February would be no less than £82m, a significant improvement on £54.1m last time. The City, however, has pencilled in a slightly higher profit line of £82.8m for full-year figures due to be announced on 9 May.
Matalan, based at Skelmersdale, Lancashire, has become the darling of the London Stock Exchange over the last year following consistent growth in profits and store numbers. Today, it confirmed it would open another 19 outlets and bring its tally of out-of-town stores to 142 by February 2002.
David Liston, an analyst with Gerrard, believed Matalan’s share dive today was caused by its own recent success. “In light of its previous record, the market has been factoring in some quite high numbers for the company. Previous expectations have been higher than they’ve shown to be at the moment.”
He said Matalan remained one of the sector’s strongest performers, bettering most discount and mass market operators. Liston added: “It may be that market expectations will come back to more reasonable levels.”
Matalan suffered a similar backlash from the City last month when it reported strong Christmas sales. It saw its share price tumble 34% as investors worried over margins. In the trading statement today, Matalan said like-for-like business during the year was ahead by 21.7%, while its share of the market had improved from 1.7% to 2.3%.
John Hargreaves, the founder and chairman of the group, said today: “I am very pleased with our expected financial performance for the year.”
Further to announcements at the end of last year, Matalan said contracts had now been exchanged to open 19 stores. That is one less than expected because one of the stores was opened during the current financial year. In total, Matalan opened 24 stores, resited another five outlets and extended a further seven locations during the last year.
It has 260,120 sq m (2.8m sq ft) of space and will add a further 74,320 sq m (800,000 sq ft) in the next 12 months.
Overall, sales for the year to 24 February were £586m, compared with £397.9m pa earlier. Gross margins for the last 26 weeks of the year were down slightly to 41.2% from 42.8%.
EGi News 28/02/01
