As Matalan founder John Hargreaves’ son Jason Hargreaves takes the helm, Retail Week takes a look at how he can improve performance after a first quarter slowdown.
Value fashion retailer Matalan has enjoyed mixed fortunes of late. It delivered full-year EBITDA up 10% to £100m to February 23 but recorded a 7.2% sales plunge to £258.6m in its first quarter to May 25. Operating profit dropped to £19.4m from £23.6m over the quarter.
The value fashion sector has become increasingly competitive with a number of players performing strongly. Primark has become the dominant force, while supermarkets are also enjoying growth. But Matalan’s family-focused offer means it is “difficult to be specific and difficult to get young fashion trends,” says Verdict analyst Maureen Hinton.
Last week value womenswear retailer Bonmarche, which shares some of Matalan’s older target demographic, revealed a £10.5m pre-tax profit, demonstrating it is possible to be successful in the sector - Bonmarche was bought out of administration after the collapse of Peacocks. Hinton says however that Bonmarche’s focus makes it the force in its niche, while Matalan has a raft of rivals.
In addition, Matalan’s preference for locating stores on retail parks means it does not benefit from the varied footfall of its rivals. Primark in contrast operates stores across a variety of locations, mainly on the high street and in shopping centres.
Hinton says: “Matalan is at a disadvantage because even the supermarkets that are out of town are finding it tough.” She adds however that high street stores may not be the answer for Matalan. “The trouble is that if you open on a high street then costs go up,” Hinton points out.
Jason Hargreaves, who replaces Darren Blackhurst, will seek first to steady the Matalan ship. He is the seventh boss in 12 years. Last week is also emerged that director of merchandising Jonathon Fitzgerald is to leave the retailer.
Hinton says the appointment of Jason Hargreaves is a sensible one. “Jason knows the business well but it’s pretty tough and they need to get the volumes, but people are spending less. He has a challenge on his hands,” she says.
Matalan, which was founded in 1985, also has a significant homewares offer but Hinton believes it needs to do more to make it a go-to retailer in the category. “Homewares has been one of its strengths but it’s not a natural destination for shoppers as they think more of TK Maxx. Now retailers like Next have a homewares offer the market is much more competitive, including on price.”
Hinton believes Jason Hargreaves will need to focus on costs, marketing and product range. “It needs to get all of these areas up to a higher standard and appeal to the family shopper across the board,” she concludes.