Matalan, the British clothing and homeware retailer, experienced a difficult first quarter as the Covid-19 pandemic significantly impacted its revenue. Between March and May, the company saw a drastic decline of over 70% in its revenue, reaching a low point of £75.3 million. This resulted in a staggering decrease of 163.2% in gross profit, leading to a loss of £23.7 million. Additionally, the operating profit before exceptional items fell by £59.7 million, resulting in a loss of £37.4 million. The total loss for the period amounted to £53.8 million, a stark contrast to the £1 million profit in the same period the previous year.

Furthermore, Matalan’s cash reserves also suffered, dropping from £71.2 million to £40.9 million. However, compared to many other companies, Matalan’s cash reserves faired relatively better during this ongoing crisis.

CEO Jason Hargreaves acknowledged that the closure of physical stores had a significant impact on the company’s revenue. Although Matalan’s webstore continued trading during the quarter, it was unable to fully offset the loss of revenue resulting from store closures. However, the company was able to reopen its stores on May 18 and benefited from the sale of its homeware products. Hargreaves highlighted that Matalan’s larger format and out-of-town store locations have been performing well since reopening.

Industry analysts have emphasized the importance of Matalan enhancing its online presence further, considering the figures from the first quarter. Sofie Willmott from GlobalData noted that while Matalan experienced a 24% increase in online sales in the previous financial year, it still lags behind competitors such as Next and John Lewis & Partners, who have prioritized developing robust online experiences. Willmott explained that retailers with established digital channels were more resilient during the crisis. However, she also acknowledged that Matalan’s webstore played a crucial role in generating revenue, unlike Primark, its value-oriented rival, which solely relied on physical stores and lacked an online transactional website. Willmott speculated that some Primark customers may have turned to Matalan’s webstore for essential purchases like childrenswear.

The devastating impact of Covid-19 on the retail industry is evident, with many companies facing significant financial losses. Matalan’s first-quarter results underscore the importance of a strong online presence and the ability to adapt to changing consumer behaviors during these challenging times. It will be crucial for Matalan to invest further in its digital capabilities as it aims to recover from the setbacks and sustain its business in the post-pandemic retail landscape.

Useful links:
1. Next
2. John Lewis & Partners