Matalan profits take hit from discounted lockdown stock

Matalan has reported a dive in profit for the second quarter of the year following heavy discounting.

For the 13 weeks ended 29 August 2020, EBITDA loss post adoption of IFRS16 was 28.5 million pounds, compared to 42.8 million pounds the year before. This was largely impacted by the retailer’s heavy discounting of surplus seasonal stock brought out of the lockdown period.

Total revenue was down 3.9 percent to 258 million pounds for the quarter.

The company ended the quarter with a “strong closing cash” of 162.3 million pounds compared to 73.3 million pounds the previous year.

The remainder of its stores reopened in June and have traded “well”, resulting in the company’s underlying sales performance on a like-for-like basis being largely in line with last year.

Strong cash balance

Steve Johnson, executive chairman of Matalan, said: “As previously announced, in June we successfully introduced additional liquidity into the business and reduced our cash paying debt service costs. The benefit of this exercise, in addition to the good stock clearance and sales performance, as well as the actions taken to manage working capital, capex and costs, are evident in a strong cash balance at the end of August.

“This healthy liquidity position provides the business with headroom to normalise its working capital position as we enter what will be another volatile and challenging trading period.”

Commenting on a potential resurgence of Covid-19 and further government restrictions, Johnson said: “[This] will without doubt create further pressure on the economy and consumer behaviour in the coming months. As a result, we will remain cautious as we trade through the Autumn/Winter season, although confident that Matalan has demonstrated its robustness since trading in stores resumed and that we have taken all appropriate actions to protect our business, colleagues and customers.

“Whilst much of our focus is necessarily on the near term trading environment, there remain many opportunities to develop the business by further enhancing customer choice and experience alongside continuously improving our own efficiency and agility. As always, we intend to vigorously pursue these opportunities.”

Photo credit: Matalan, Facebook

 

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