Matalan's Financial Slump and Future Plans Post-2023 Overhaul
Retail chain Matalan reports substantial losses, resulting in nearly 200 job cuts
Things haven't been rosy for Matalan, with its sales registering a steep drop underneath the £1bn mark and nearly 200 jobs being axed. The Liverpool-based retailer reported an whopping £67.2m pre-tax loss for the year ending February 2025, following a previous loss of £60m in the previous year.
The financial accounts also reveal a plunge in revenue from £1bn to £985m over the same period. Additionally, the average workforce count reduced from 10,461 to 10,277 employees.
Matalan attributed the sales slump to diminished consumer spending leading to a intensified market competition. The decline was further aggravated due to stock availability issues that arose due to the Red Sea crisis and the company's decision to prioritize profitability over revenue growth.
Despite the dip in sales, Matalan managed to improve its gross margin by three percentage points to £510m and boost its EBITDA (earnings before interest, taxes, depreciation, and amortization) by six percent to £56m.
In October 2024, Jo Whitfield stepped down as the retailer's chief executive after a tenure of 18 months. The successor is yet to be announced. The financial results for the year mark the second since the company was taken over by its lenders in January 2023, effectively ending founder John Hargreaves' involvement.
Lead by Invesco, Man GLG, Napier Park, and Tresidor, the lenders finalized the deal after Matalan launched a sales process in September 2022. The deal saw the lenders reducing the company's gross debt by £257m to £336m and agreeing to provide up to £100m in new growth funding.
"Brand Confidence Remains Strong"
Karl-Heinz Holland, the executive chair of Matalan, declared, "We've been aggressively pursuing the transformation of Matalan against a turbulent consumer and economic climate. The extra £25m of funding secured from our core investors post-year end has allowed us to kickstart our strategic plan...."
Holland continued, "With a relentless focus on maintaining profitability, we have achieved EBITDA growth. Our store revitalization plan is outperforming our expectations, and we are making great strides towards our goal of opening ten new stores and upgrading thirty existing locations in FY26. Our customers are at the heart of everything we do, and our renewed dedication to enhancing quality and value reflects this."
Despite the positive momentum heading into the new financial year, the company acknowledges the continued competitive market and uncertain economic conditions. Holland cautioned, "However, we remain fully aware of the difficult operating landscape and understand that there's much more work to be done to finalize our transformation. At the same time, we are optimistic about the strength of the Matalan brand and the opportunities that lie ahead."
Insights:
- Despite a drop in revenue to £985m, Matalan managed to grow its adjusted EBITDA by six percent to £56m, driven by improvements in gross margins (up three percent to £510m) and cost controls.
- The sales slide was in part due to subdued consumer spending, increased competition, stock availability issues, and a strategic focus on profitability over revenue growth.
- The retailer is aggressively investing in its product quality, store revitalization, online presence, and supply chain capabilities to support growth, thereby laying the groundwork for long-term sustainability amid tough market conditions.
- The financial accounts of Matalan, despite showing a decrease in revenue to £985m, reported a growth in adjusted EBITDA by six percent to £56m, primarily due to improvements in gross margins and cost controls.
- In an effort to enhance its long-term sustainability amid challenging market conditions, Matalan is aggressively investing in its product quality, store revitalization, online presence, and supply chain capabilities.
