Matalan in price-cuts fightback

PROFITS at discount retailer Matalan were virtually halved last year after what chairman and founder John Hargreaves described as a 'deeply disappointing' performance.

The group, which hit the market with two profit warnings either side of Christmas, turned in a pre-tax total of £60.7m against £117.4m the previous year.

This was at the bottom end of its earlier forecasts, but there was more encouraging news on current trading, with sales now back in positive territory.

'It's so far, so good,' said chief executive John King, 'but let's just get through to the AGM in July.'

Former retail high-flier Matalan has been battling against increasing competition from supermarket groups such as Asda and Tesco, but is attracting more customers into its stores with improved marketing and reduced prices.

Average selling prices have been cut by 10% over the past couple of months, and customers are now buying more, King said. That has fed through to a 3.1% increase in like-for-like sales in the nine weeks to 1 May, compared with a fall of 6.5% in the year to 28 February.

Total sales for the year were up 2.6% to £1.05bn and the dividend is kept at 8.1p.

Takeover speculation continues to surround the group, with Hargreaves, who still controls just over 50% of the shares, said to be willing to sell. King declined to comment on the market rumours but said that Hargreaves remains 'very supportive'.