The retailer said sales were hit by its planned withdrawal from the unprofitable grey market and the lacklustre homewares market. Core clothing sales - which represent 80 per cent of Matalan's business - were more resilient, up 0.5 per cent (excluding the grey market).
Matalan chief executive John King said: 'Trading conditions remain challenging, however our agenda of focusing on improving profitability and cashflow is now beginning to bear fruit. Gross margin is improving, we have tightened controls over costs and stocks and our working capital improvements will see the company in a healthy net cash position by the end of the year.'
Matalan opened three stores in the first half and a further three will be opened by the end of the financial year. This represents a significant reduction in store openings compared with the record opening period of 2002/2003, when 20 stores were opened.