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Last Updated: Wednesday, 1 March 2006, 23:24 GMT
Retailer Matalan sees sales drop
Man walking past a Matalan store
The cheaper end of the clothing market is more and more crowded
Budget retailer Matalan has seen its sales decline amid increased competition and weak demand for its homeware goods such as picnic hampers.

The Lancashire-based company said that like-for-like sales declined 7.4% in the 26 weeks running to 25 February. For the year, they dropped by 6.9%.

Matalan said the past year had been "difficult" and added that the outlook for retailers remained "challenging".

Despite that, Matalan said it was still on track to meet its profit targets.

Shares in the company, which has 193 stores across the UK, closed up 6p at 189.25p.

'Taking action'

Matalan's outgoing chief executive John King said that, despite competition from rivals including Asda, Primark and New Look, the company had managed to maintain its share of the clothing market at 3%.

At the same time, Matalan managed to increase its gross margin by 0.5% over the 26-week period as it decided not to offer big price cuts on branded clothing.

Core clothing sales were down 1.7% during the period, compared with a 5% drop in total revenues.

Matalan said that homeware sales had "continued to disappoint" and that it had been forced to cut prices to shift surplus stock.

Matalan "is taking action to address the issues at its Home operations", Mr King said.

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