Discount clothing chain Matalan admits to a difficult year after annual profits and sales figures fell sharply.
Matalan posted underlying profits of £56.7 million in the 12 months to February 25, compared with £80.5 million a year earlier, as like-for-like sales tumbled 6.9 per cent in the face of a competitive trading environment.
It warned it expected another challenging year, but added that changes to the business had resulted in an improved market share in clothing, with like-for-like sales being just 2.2 per cent lower in the past nine weeks.
This reflected better sales of its core clothing ranges, in particular knitwear, while the rate of sales decline in home-wares has been arrested with a number of new ranges.
Matalan also said its margins continued to improve with initiatives to deal with slow moving products and accelerate the sale of prior season merchandise.
However, it warned that the extent of end-of-season mark-downs depended on how it traded through the peak season in the next two months.
"This was a difficult year for Matalan in a tough retail environment," said chief executive John King, who is to quit at the end of December.
"The retail environment remains subdued, and pressure on costs continues."
Mr King is to receive a golden goodbye equal to a year's basic pay of £420,000 plus benefits.
This has drawn criticism from some institutional shareholders.
As well as operational efficiencies, Matalan said its priorities included the improvement of its store portfolio after refurbishing 35 outlets in the last year and opening another eight - as part of an annual target of up to ten outlets.
Matalan is finding the budget end of the market increasingly competitive, with rivals Asda, privately-owned Peacock and New Look, and Associated British Food's Pri-mark among those battling for market share.
The firm has over 190 stores across the UK including one in Birmingham.
Yesterday's figures were in line with expectations after Matalan said in March that it expected profits to be in the region of £55 million and £60 million.
Bottom-line profits were £ 36.3 million, against £80.5 million last time, after Matalan took a one-off charge to cover the impairment of software which the company has now decided not to fully implement.
However, Richard Ratner at Seymour Pierce said he had hoped a recent high profile television advertising campaign might have had more of an impact, despite claims by Mr King that it was working.
"Despite the company's claims on market share we believe that Matalan will struggle to stand still this year," Mr Ratner said. Matalan maintained its total dividend at 8.9 pence a share.
Mark Charnock, analyst at Investec, said a 4.5 per cent yield was the "main positive factor".
It compares with an average dividend yield of 3.3 per cent for the general retail sector.
There is constant speculation that the chairman and founder of Matalan, John Hargreaves, whose family owns around 52 per cent of the discount chain, is looking to sell.
Reports have emerged that Mr Hargreaves could be will-ing to take around 235p a share but analysts remain sceptical of any bid interest. ..SUPL: