Matalan has reported a dive in profit for the second quarter of the year due to heavy discounting aimed at clearing spring stock following the nationwide lockdown period.
In the 13 weeks ending 29 August, the value retailer saw EBITDA plunge by 44% year-on-year to £28.5m, compared to £42.8m the year before. This was largely the result of heavy discounting of surplus seasonal stock brought out of the lockdown period.
Total revenue was down 3.9% to £258m for the third quarter.
The company ended the quarter with a “strong closing cash” of £162.3m compared to £73.3m the previous year.
The remainder of Matalan’s 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.
Matalan executive chairman, Steve Johnson said: “A key focus for us during the summer was selling through the surplus seasonal stocks that we brought out of the lockdown period.”
“We achieved our objective of exiting the season with a healthy terminal stock position, comparable with previous years, accepting this action had a heavy impact on profits during the quarter.”
“The achievement of this important objective is a testament to the hard work of all of our colleagues in shaping and executing compelling events for our customers and positions us well to recover our full price sales mix in the autumn/winter period.”
“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.”
Johnson added that the current second wave of Coronavirus and new government-imposed restrictions would further shift 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.”