• Sold to a group of investors in early 2023  
• Embarking on a transformation programme, with experienced Jo Whitfield at the helm  
• Areas of focus include driving online and improving product choice and price for consumers   
• Migrated website to THG Ingenuity platform 
• Integrated a new Gen-AI tool to automate product descriptions for items on its website 
• Providing an easy and efficient omnichannel customer experience  
• Executing a compelling and credible product offer  

As well as online operations, UK value retailer Matalan has a domestic estate of around 230 stores and some 50 international franchise stores. 

Its UK stores are mainly on retail parks and Matalan was one of the first retailers to start selling fashion from out-of-town superstores. However, it has more recently made a move to city centre stores, opening an Oxford Street flagship store in 2015.  

City centre stores are around 40% smaller than typical Matalan stores, yet its Liverpool store was reported to have achieved sales densities (sales per sq ft) that were nearly double that of its out-of-town stores.  

The business has also been undergoing a store refurbishment programme to deliver an improved shopping environment and better choice for customers. Store refurbishments were paused to help with long-term liquidity during the pandemic but started up again in 2022.   

After a tumultuous period, value chain Matalan commenced a formal strategic sales process in late 2022 and in January 2023 was rescued by a debt-for-equity swap with its lenders.  

Key stages in the sale included: 

- Bondholders that were owed £350m by Matalan had effectively taken control of the retailer in late 2022 after Matalan’s board failed in its efforts to refinance its debt during the summer.  

- In January 2023 Matalan was acquired by a group of investors led by Invesco, Man GLG, Napier Park and Tresidor. 

- This brought control over the company by former chair and co-founder John Hargreaves to an end.  

- The investors committed to putting an extra £100m in new capital into Matalan to be invested in its strategy and growth ambitions, as well as promising an extension of debt maturities to 2027. 

- They also agreed a £257m “day-one significant debt reduction”, which took the brand’s total debt to £336m.    

- The arrangement is set to support the continued improvement of the retailer’s logistics network, stores and website.   

- The completion of the transaction marked the end of the strategic sales process.  

- John Hargreaves had been bidding along with Wall Street private-equity fund Elliott Management and a spokesperson for the Hargreaves family office said that John Hargreaves and the family were disappointed by Matalan’s decision.   

- Prior to the sale, Matalan’s debts had been due to be repaid in January 2022 but the company secured a six-month extension while the sale process was carried out.   

- The Telegraph reported that bondholders were seeking bids of at least £210m but would take control of the business if bids fell below that amount.   

Turning the business around 

Following the debt-for-equity swap, Matalan is attempting to turn the business around. This has included the hire of the experienced former Co-op Food chief executive Jo Whitfield as its chief executive officer, as well as former Lidl chief executive officer Karl-Heinz Holland as chair.  

Around a month after its lenders agreed to take over Matalan, and following a tough 2022 autumn period at Matalan impacted by macroeconomic headwinds and increased business costs, the retailer published a business plan update for the 2023 financial year through to the 2025 financial year. 

This included revisiting assumptions around currency, energy costs, the freight market and wage rate pressure, as well as reviewing its FY2023 “product range, pricing strategy and buy plan”.  

It identified key areas to address in order to recover profitability as:  

• Range optimisation and stock control  
• Logistics productivity and supply chain  
• Markdown management  

Key channel focus areas, including the March 2023 website transition to THG and additional automation of the supply chain  

The business is focusing on customers, providing stronger product assortments, improving channels and making it easier to shop, “investing in growth enablers” and “having a simpler approach to driving cost out of business”.  

In its results for FY2022, Matalan said almost a quarter of its stores had been given updated layouts and fixtures so that it can increase range and choice, as well as improving availability for customers. Such initiatives have increased overall merchandise space in these stores by 20% “without any increase in the physical footprint of our stores”. 

Update in mid 2023  

On announcing Matalan’s results for the first quarter of the 2023 financial year, Whitfield said that her first three months in the job had focused on building a strong leadership team and that the businesses’ two key areas of attention are driving its online channel and improving product choice and strengthening its price position for consumers.   

Website migration to THG Ingenuity 

Its decision to migrate its website to The Hut Group’s (THG) Ingenuity Platform in a process that started in late 2021 is part of Matalan’s digital transformation programme. 

This will deliver improvements such as increasing capacity to meeting growing online demand through a nationwide fulfil-from-store strategy and warehouse automation, while other features enhancing customer experience include more product availability and choice, being able to see store stock online, better personalisation, faster response times and live chats.  

The migration will arm Matalan with a faster, scalable ecommerce operation. 

Sharing its outlook in its business update, published in early 2023, Matalan stated that it expected the share of total sales coming from online to continue to grow, coming in at 18% in FY2022, 20% in FY2023, 23% in FY2024, and 25% in FY2025.  

However, talking about Matalan’s first quarter results for the 2023 financial year, Whitfield said: “From an online perspective there has been a market trend that has shifted demand back towards stores. However, in addition we have seen our own online sales step back to an even greater extent.  

“The business migrated to the THG Ingenuity platform at the end of March with some limited cutover disruption into early April. As with any scale project of this nature we are getting to grips with using a new platform with new functionality and are working with the THG team to learn quickly and respond with the improvements needed to both the platform and the customer offer.” 

New brand campaign

In March 2024 Matalan launched a new multimillion-pound brand campaign that reinforces its strategic transformation and dedication to value and supporting families in everyday life. The campaign, which marks further progress in Whitfield’s transformation of the business, endeavours to demonstrate to families ‘We get it, we’ve got you’. It is set to be rolled out across TV, radio, social media and in-store activations.

Integrated new Gen-AI tool 

In early 2024 Matalan integrated a new generative-AI (Gen-AI) tool to automate product descriptions for items on its website. 

The GenAI and large language model has been developed in partnership with digital transformation consultancy Kin + Carta using Google’s Vertex AI, which reads product metadata and imagery to select relevant details for online descriptions of Matalan’s products.  

A first in the UK, the implementation is part of Matalan’s digital transformation strategy and is intended to improve productivity for the business fourfold and elevate the shopping experience for customers across its clothing and home categories.  

Matalan chief customer and omnichannel officer Ali Jones said: “As the UK’s first retailer to be leveraging Gen-AI in this way, this is a hugely exciting moment for Matalan. Not only does it demonstrate innovation into new and so far unexplored areas, but it shows our commitment to putting our customers and the shopping experience first – whether they’re shopping on our website or through the Matalan app.” 

Offering consumers good value 

Matalan furthered its value proposition from early 2024, promising to help consumers amid the cost-of-living crisis with a £35m investment in lower prices on more than 700 products. 

The retailer stated that it has unlocked price cuts through a “more collaborative” buying and sourcing strategy, and by passing on the reduction in input costs to customers as inflation falls. 

The move was described as an example of Matalan’s progress under Whitfield as she continues to “drive efficiencies” and “improve ranges” for shoppers. 

Concession partnerships with other retailers  

As well as a previous partnerships via which both toy retailer The Entertainer and Claire’s Accessories established concessions in Matalan stores, Matalan extended its partnership with Card Factory to roll out Card Factory concessions to all Matalan UK stores by the end of 2023.  

Relaunch of customer loyalty scheme  

The customer experience is also being bolstered via the retailer’s relaunch of its customer loyalty scheme under the name Matalan Me in April 2022, including more personalised benefits easily accessed through its digital reward card and app.  

Matalan Me customers can access exclusive rewards and discounts, birthday treats, and have early access to the Matalan Sale.  

Those using the programme both instore and online have chance to win their whole shopping basket for free, each time they shop. 

Third-party brands  

In late 2020, Matalan introduced online direct-delivered ranges via branded partners, which allows it to offer third-party products online delivered directly to customers from the third-party without passing through Matalan’s supply chain. 

On the subject of its third-party offer, the retailer stated: “These brands proved to be not only popular with existing consumers, but also with new consumers, who also purchased Matalan label products in the same transaction. For this reason, we view the addition of new third-party brands to our offering as a key way to both attract new consumers and retain existing ones, rather than as a threat to the sale of our own labels and products.”  

It strengthened its online offer in late 2023 by adding 10 new third-party fashion brands to its website, including Yumi, Quiz and Vanilla, with more planned for 2024.  

Prior to the sale process 

Some key priorities for Matalan prior to its sales include: 

• Encouraging shoppers to spend across channels to drive frequency, revenue and profitability. 
• Click and collect is extremely popular with Matalan shoppers, proving to be a linchpin of the retailer’s multichannel strategy, encouraging online shoppers into the store and prompting them to spend more.  
• The opening of smaller format stores in city centres made Matalan more visible on the high street. 
• Using customer insight to understand how friction can be removed from the shopping journey. 
• Continuing to test and scale new categories to extend customer choice, with a focus including branded toys and health and beauty.  
• Stepping up investment in customer-facing technology with rollouts including a new EPoS system and self-service checkouts.  
• RFID technology was introduced to stores to enable greater stock visibility and accuracy, as well as helping it test enabling online fulfilment from store inventory.  
• Although using stores to fulfil online demand is important, Matalan has said it recognises that fulfilling online demand from its Knowsley Distribution Centre remains the most cost-effective choice.  
• Batch-packing and pocket sorting automation was implemented at the Knowsley DC in FY2022 to enhance capacity, efficiency and service levels.  
• Modernised its buying and merchandising systems to enable better analytics and decision-making.  
• In FY2020 Matalan said it had made progress with the adoption of AI and CGI in its marketing production processes. 
• Wi-Fi was rolled out to stores to make sure customers can use Matalan’s app in store to scan items in order to be able to see reviews and order online.  
• And the retailer also introduced in-store shopping capabilities to its mobile app to help shoppers find products more easily in-store by scanning a barcode for additional product information.  
• Over the years, key technology suppliers have included Capgemini for IT services; Shift Commerce for ecommerce; ContentSquare for data and analytics; Oracle for mapping inventory against shopper demand across its store estate. 
• In terms of technology, a “test and learn mentality” has been critical for Matalan. 
• It is taking a relatively low-risk approach to international expansion by operating franchise stores in the Middle East and Europe. 
• Trades through 50 stores in 14 countries as of end-February 2023 operated by retail operator partners.  
• Historically, franchise stores have been supplied under a wholesale agreement, with products shipped with a modest mark-up and at the franchisee’s risk from its UK distribution centres. However, Matalan had plans to start supplying these stores directly from its overseas hubs.