Fashion retailer Matalan has reported a surge in profitability despite a dip in sales amid “challenging trading conditions” and a year of transformation at the business.

Matalan Cumbernauld store

Matalan ‘kick-started the transformation’ of the business last year

For the full year to February 24, 2024, Matalan posted a 92% increase in adjusted EBITDA from £28m to £53m. 

Matalan also reported a 44% drop in its pre-tax loss from £106m last year to a total of £60m this year.

The fashion and lifestyle retailer attributed its improved underlying profitability to better gross margins and operational activity as well as effective cost control.

Despite this, sales during the period dropped 6% year on year from £1.15bn to £1.08bn, while like-for-like sales dipped 6% from £1.12bn to £1.05bn.

Matalan said the drop in revenue was a result of “challenging trading and market conditions” as well as strategic decisions made throughout the year.

The retailer’s gross margin during the period increased 8% to £495m as its efforts to lower levels of discounting and a focus on full-price sales growth paid off.

Matalan hailed the strength of its new executive team, as well as improved capabilities across its wider employee base, amid its business transformation strategy being led by chief executive Jo Whitfield.

During the year, Matalan invested £35m in lowering prices in a bid to “reset value credentials” and help families during the cost-of-living crisis.

The retailer also introduced 35 new third-party brands, built on its brand purpose and proposition, and extended its size ranges available online to bolster both choice and style for all customers.

After what the company called “good early operational progress” during its year of transformation, Whitfield said: “In the last year, we have kick-started the transformation of Matalan against a very challenging backdrop, resetting the foundations of the business. We delivered a significant increase in underlying profit as a result of our clear focus on growing full-price sales and tight cost control.

“With a new leadership team in place, we have put the customer back at the heart of Matalan to make sure we become top of their list of go-to value retailers. We have reset our value proposition, acted decisively to improve and strengthen our online performance and worked to improve our in-store execution.

“Looking ahead, we are determined to deliver better value, more choice and improved style for all our customers. It is still early days in our transformation, and while we have much more to do, with challenges ahead, we are pleased that the actions we have already taken are having an impact as we build a stronger, more modern Matalan.”