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Matalan's profits hit by past warehouse problems

Matalan’s EBITDA dropped by 44% to £56.2m for the year to February 27, after operational challenges at its distribution centre in Knowsley during 2015 “significantly eroded” its margins.

Matalan's Oxford Street store

 

The value retailer said the issues disrupted the flow of stock to its northern stores, which reduced in-store availability. This impacted revenues in the first half of the year, while unseasonal weather impacted footfall and the performance of its autumn ranges in the second half. 

The warehouse issues led to a “significant” increase in markdown costs during the financial year, as additional seasonal stock had to be liquidated at deeper levels of discount.

Matalan issued a profit warning in January, saying it had revised its full-year EBITDA down to between £54m and £56m from between £60m and £65m.

The warehouse is now “operationally stable”, it said, and store availability has returned to normal levels.

However, total revenue at the firm slipped 3% year on year to £1.1bn. Operating profit before exceptional items fell 63% to £26.3m.

Matalan had a strong closing cash position of £74.5m, down from £93.5m the year before.

Managing director Jason Hargreaves said: “The full-year results issued today reflect the scale of the operational challenges encountered with last year’s warehouse transition. As a consequence, the overall proposition delivered to customers, both in stores and online, was severely challenged and margins were significantly eroded.”

He added that the firm was “focused” on its recovery plan: “The online business is being adequately supported, allowing service levels and delivery options to be restored for customers.

“Having faced into the problem, we closed the year with clean stocks and are well positioned to continue to improve our mix of full price sales and margin. While the market remains challenging and volatile, we are clear and focused on our recovery plan and cautious in our planning.”

Matalan has 226 stores in the UK and 22 overseas franchise stores.

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