Discount clothing retailer Matalan said today that early second-half trading had worsened and annual pretax profits would fall “materially short of market expectations”.
Matalan said shoppers buying fewer higher priced goods had caused a sharp fall in sales during the last three months, which it was unlikely to recover in the rest of the financial year.
The group, based in Skelmersdale, Lancashire, said total sales in the first five weeks of the second half grew 16.2%, with like-for-like sales up by 5.7%.
But it said trading conditions had deteriorated since then, with total retail sales growing just 2.4% in the 14 weeks to 6 December and like-for-like sales dropping 7%.
Matalan said the full-year result would depend on remaining Christmas trading and the critical end-of-season sale starting on Boxing Day.
But it said it was unlikely to recover the sales shortfall to date in the rest of the financial year.
“The board now expects pre-tax profit for the year to 28 February will fall materially short of market expectations,” it said in a trading update.
The membership-based retailer, which owns the Lee Cooper jeans brand, has 171 stores with more than 9.9m active members.
In October, it said problems including inconsistency of monthly mailshots, less choice due to lower stocks and range gaps particularly in classic ladieswear had caused half-year profits to fall 23% to £41.2m.
It said lower average selling prices had caused its latest problems, as consumers bought less highly priced items such as winter coats and leather jackets during the crucial early winter trading period.
Matalan said it felt the trend was making itself felt across the wider market.
Although sales of lower priced items had performed better, particularly improved Christmas gift and accessories ranges, that had been insufficient to offset the reduced sales of higher priced items.
The firm has taken steps to improve its performance, including introducing a clearer pricing structure and more consistent direct mailing.
It said today that customer, or member, numbers had increased to 10.3m from 8.9m last year and market share has grown by 6.5% against 5.9% in 2002.
“There is still much to do,” the group said. “However, the board believes the management team is taking the actions required to get the business back on track.”
Seymour Pierce said it was cutting its 2003/04 full-year pretax profits forecast on Matalan to £83m from £113m and to £100m from £130m in 2004/05.
“This is a poor performance, with Matalan really suffering the impact of a weak clothing market,” the broker said.
References: EGi News 11/12/03
