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Thursday, 11 January, 2001, 17:56 GMT
Matalan leads retail share plunge
A shopper in Matalan
Matalan's sales growth continues to be strong
Shares in a swathe of High Street retailers dropped on Thursday, as the market reacted negatively to Christmas trading statements.

Leading the group downwards was the discount retailer Matalan.

Its shares plunged by as much as 46% in early trading, down 334p at 393p, prompted by concerns that its profit margin on sales was "slightly lower" than the same period the year before.

I think that the margins have spooked the market, and the sales numbers were not that exciting

Eithne O'Leary

This was enough to overcome the company reporting that sales in the six weeks to 6 January were up by more than 16%, stripping out the effect of new store openings.

Including new stores, its overall sales were 48.9% higher than the same period a year earlier.

By the end of the day Matalan's share price had recovered slightly to 480p.

Argos was Next

Over the longer period of 19 weeks up to Christmas, it said, like-for-like sales were 13.4% ahead.

Argos-owner Great Universal Stores (GUS) and Next also released Christmas trading results which disappointed the City.

Next said that sales in the retail and Next Directory divisions were up 12% in the 19 weeks to 24 December compared to 1999.

But it added that sales in the run-up were "below expectations" which meant it had more stock than expected to be cleared in its post-Christmas sale.

This news sent the shares plunging 106p to 690.5p.

But at the end of trading they had recovered a large part of their value, to end 15.5p down at 781p.

Other tumblers

Britain's largest home shopping group GUS also got caught up in the rout.

Its shares fell 84.5p to 460p, a two-month low, after the company said its business in the US was being squeezed by the slowdown in the world's largest economy.

These reports sent other retail shares tumbling in sympathy - with Peacocks, down 15p to 89.5p, New Look, off 7p to 71.5p, Arcadia, shedding 8.5p to 90p and Alexon, dropping 11.5p to 48.5p.

Most retail stocks had recovered at least some of their value by the end of the day, but GUS was still down 82p at 462.5p.

Matalan is one of the UK retail sector's star performers in recent years.

People expect it (Matalan) to continue and its not going to be in this fast stage of growth for ever

Amanda Large

It has been seen as having huge growth prospects, with its success in attracting shoppers largely blamed for the difficulties which have affected longer established clothing firms such as Marks & Spencer and Burtons owner Arcadia.

'No justice'

Matalan said its share of the UK fashion market was up to 2.2%, compared with 1.5% in 1999.

Ian Smith, group finance director of Matalan, defended the group's margin level, saying he was "happy" with it.

He added: "There is no inherent problem with our margins....There is no justice in this world."

Amanda Large, analyst at stockbroker Gerrard said: "It's what happens when a company constantly out-performs. These things happen - people expect it to continue and its not going to be in this fast stage of growth for ever."

Eithne O'Leary, analyst at ABN AMRO said: "I think that the margins have spooked the market, and the sales numbers were not that exciting."

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See also:

01 Nov 00 | Business
Matalan profits surge
13 Mar 00 | Business
Hard times at UK clothes shops
10 Mar 99 | The Company File
Matalan bucks retail gloom
23 May 00 | Business
M&S confirms gloom
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