Matalan PLC History
Skelmersdale, Lancashire WN8 9TB
Sales: $845.4 million (2001)
Stock Exchanges: London
Ticker Symbol: MTN
NAIC: 448140 Family Clothing Stores; 452910 Warehouse Clubs and Superstores
Matalan is a totally unique out of town retailer, committed to providing outstanding value for money. We offer up to the minute fashion and home wares at prices up to 50 percent below the equivalent High Street price. More value: By buying direct from the manufacturer, by being situated at low cost, convenient out of town locations, keeping overhead costs low and operating on lower margins, Matalan is able to offer unbeatable value! More style: With all the latest key looks for the season, from modern basics to classic styles, and with a great selection of top brands including, Falmer, Playtex, and Wrangler, Matalan offers fantastic values for all the family. You will also find clothes from top designers like Valentino, Calvin Klein, Ralph Lauren. More choice: Nobody else offers such fantastic value and great ranges. So it's no wonder we're the fastest growing fashion retailer.
- Company is founded by John Hargreaves.
- John Hargreaves resigns as chief executive and is replaced by Angus Monro.
- Matalan moves headquarters to Skelmersdale.
- The company lists on the London Stock Exchange under the symbol MTN.
- Matalan launches credit card.
- Matalan announces purchase of the second largest European jeans maker, Lee Cooper Group; CEO Angus Monro resigns and is replaced by Paul Mason.
Matalan PLC is the fastest growing retailer in the United Kingdom with more than 120 stores that market High Street fashion at bargain prices. Like the U.S.-based Sam's Club, Matalan PLC is located outside of larger cities and offers a club warehouse concept in savings. Each store boasts an average of 30,000 square feet of clothing for the whole family. The company has been rapidly expanding since its founding in 1985.
1985-95: U.S. Trip Sparks Business Idea
John Hargreaves was the son of a Liverpool docker who had worked himself into the successful position of market trader in the 1970s. But in the early 1980s, he took a trip that changed his life. While on vacation in the United States, he became fascinated with the retail concept of club warehouses--located outside of towns and with deep discounts. Hargreaves was determined to try the concept in the United Kingdom; in 1985, he opened the first Matalan Discount Club in Preston.
The idea was a success and, by 1995, Matalan had expanded to 50 stores across the country. It introduced a new concept to the United Kingdom and offered consumers a choice of better prices and good selection.
1995-99: Growing and Going Public
John Hargreaves gave up the chief executive seat in 1996 to Angus Monro but remained as chairman of the board. In 1997, the company, which had outgrown its Preston location, moved its headquarters to Skelmersdale and added a distribution center there. By early 1998, Matalan boasted 75 stores and record financial results for 1997, including a 24 percent increase in sales and an 87 percent increase in profit. In May 1998, the company listed 23.4 million shares on the London Stock Exchange to "reduce indebtedness and provide (the company) with increased flexibility to pursue expansion plans," according to a company press release.
By the end of 1998, Matalan had added 12 new stores and 210,000 square feet of selling space. The company also diversified its product line to include housewares and other non-clothing wares. "I am pleased to report that the consistent application of our strategy and delivery of our outstanding value for money proposition has produced a record set of results," said Hargreaves. Earnings per share were up 64 percent, yielding a final dividend of 5.5 pence per share.
Same-store sales grew 18.5 percent in the first nine weeks of 1999. However, the company cautioned investors not to expect that type of sustained return. "I'd like to look forward to 18.5 percent for the rest of the year, but clearly we're not planning for that," said Ian Smith, finance director in an interview with the Extel Examiner. "We're planning for much more modest growth than that--probably in line with last year, maybe slightly behind last year would be my sentiment at the moment." In 1999, Matalan bought the rights to Falmer, the second largest ladies' casualwear brand in the United Kingdom.
In June 1999, Matalan experienced its first major downturn in stock trading as U.S. retailer Wal-Mart announced its foray into the U.K. market. Wal-Mart, part of the inspiration for the birth of Matalan, purchased ASDA Group PLC and was expected to drive prices and margins down across the country. The news, however, did not stop profits from rising in Matalan's stores. Profits were up 169 percent in the first half of 1999, prompting stocks and confidences to rise. "The business continued to grow strongly in the first half of 1999, driven by like-for-like sales growth of 15.4 percent from our core estate as well as new space contribution," said Hargreaves.
By October 1999, demand for Matalan stock was high but a limited amount was available for trading on the London Stock Exchange since Hargreaves and his family held 60 percent of the stock in the company. The weeks prior to the Christmas shopping season were successful, with total sales up 43.9 percent over 1998 figures.
2000 and Beyond: Bumps in the Road for Matalan
By early 2000, the effects of U.S. retailer Wal-Mart's purchase of George at ASDA stores were obvious in the United Kingdom and caused a weakening demand for middle market clothing stores. However, Matalan, also a discount retailer, had felt little effect from the entry of Wal-Mart. The trend was seen across the United Kingdom, where retail consultant Verdict predicted that discount retailers' share of the market would increase from 8.9 percent in 1999 to 13.9 percent by 2004.
In the first ten weeks of 2000, the trading price of Matalan stock was up 31.2 percent, a strong indication of investor confidence in the company due to increases in revenue. However, Matalan Chief Executive Angus Monro cautioned, "Probably in the second half of the year there will be some slowing down of those rates of like-for-like sales growth."
The company announced in 2000 that it was continuing with its aggressive growth--increasing floor space in its stores, opening larger stores, and relocating those stores that were now deemed too small at under 10,000 square feet. The company was also identifying up to 220 new locations for the stores as well as preparing to launch a Matalan credit card.
Founder and Chairman John Hargreaves and his family decided to place 45.4 million shares on the market in 2000, reducing their stake in the company from 64 percent to 52 percent. The news was welcomed at the London Stock Exchange.
Matalan's credit card was launched in October 2000 and offered a competitive low rate of 11.9 percent, lower than other department store cards in the United Kingdom. When used for Matalan shopping, the card's annual rate dropped to 5 percent.
During 2000, Matalan's share in the U.K. clothing market rose from 1.9 percent to 2.4 percent. The number of employees rose 42 percent from 5,660 to 8,039 and active membership in the Matalan Discount Club grew 43 percent, from 4.4 million to 6.3 million. Total retail space increased 50 percent. Despite these positive numbers, Christmas 2000 was disappointing and resulted in a stock plunge in January 2001. While the company's like-for-like sales were higher than the previous year, the forecasts had been higher still and the market reacted negatively to the underperformance. Matalan lost half its market value in the half hour after the announcement that it had slower growth than expected as well as remaining inventory to sell at a discount.
In April 2001, the company and its stock were hit once again as Angus Monro resigned suddenly amid rumors of a disagreement about the company's future. The company released a brief statement that read, "Angus has established a platform for the business to grow and will leave the business in a sound financial and strong trading position. During the five years of his tenure, he has made an outstanding contribution. However, given his stated intention to leave the business in two to three years' time and the Board's desire to develop aggressively its strategic options, it has been agreed with him that it is more appropriate that he leaves at this time."
The mutual nature of the decision seemed debatable. Monro had just the week before told the London Times of his plans for the future of the company. After his resignation, the Sunday Times quoted unnamed friends of Monro as saying he was "ambushed" and "astonished." The company's board announced that founder and Chairman John Hargreaves would assume the chief executive duties until a replacement could be found.
As the search for a replacement began, market watchers reported in an AFX News article in May 2001 that some analysts wondered if a disagreement between Monro and the Hargreaves family had caused his departure and, if so, what that would mean for recruiting a replacement. Since the family owned 52 percent of the company, some believed that their influence might be overwhelming to the board and to a new chief executive. However, Finance Director Ian Smith said, "I'm sure that anybody that aspires to chief executive status will have the gumption to talk to John and will fully understand the sort of person that John is and that he is not a dictatorial owner."
In July 2001, the company purchased Lee Cooper Group Ltd., a maker of branded jeans and casual clothing. As Europe's second largest jean company, Lee Cooper employed 1,100 people and had operations in Europe, the Middle East, Asia, and Latin America. Matalan announced that Lee Cooper's management would continue and that it would act as a stand-alone division of Matalan.
Matalan recruited Paul Mason, age 41, as its new chief executive in August 2001, luring him away from his position as president and managing director of competitor ASDA Wal-Mart U.K. Mason had 20 years of retail experience and had been at ASDA for six years, playing an instrumental role in Wal-Mart's purchase of the business. "I am extremely pleased to have been offered what is one of the most exciting and prestigious roles in U.K. retailing. I look forward very much to helping build on Matalan's unique strengths and market positioning," said Mason.
Retail analysts applauded the move, and the future looked bright for Matalan. However, in October Matalan reported a sharp downturn in sales that resulted in a 16 percent drop in its stock price. The company reported that the slowdown was due to several factors, including the September 11 terrorist attacks in the United States. For 2001, Matalan's stock was down considerably and was grouped among the worst performing retail stocks in Britain. The news was not all bad, however, as Matalan's market share among clothing retailers increased and the recent purchase of Lee Cooper jeans. The company also announced plans to move into continental Europe to further expand its growth.
Principal Competitors: ASDA Wal-Mart U.K.; Marks and Spencer p.l.c.; Arcadia Group plc.
- Carter, Helen, "Disgraced Pathologist to Lose Job," Guardian, February 2, 2001.
- "Children's Clothing Market on Brink of 'Major Developmental Phase'--Verdict," Extel Examiner, October 19, 1998.
- Davey, James, "Matalan Appoints Headhunters to Search for Monro Replacement," AFX News, May 9, 2001.
- Griffiths, Ben, "Retailers Hit by Poor Christmas Sales," Business a.m., January 12, 2001.
- Hardcastle, Elaine, "Slowdown at UK's Matalan Sends Shares Tumbling," Yahoo Finance, October 31, 2001.
- "Landowner One of the Richest in the World," Northern Echo, June 16, 1000.
- "Matalan Buys Rights to Falmer Brand," Extel Examiner, May 21, 1999.
- "Matalan Cautions Current Trading Figures not Sustainable," Extel Examiner, March 10, 1999.
- "Matalan Issues Pathfinder Prospectus for LSE Float," Extel Examiner, April 20, 1998.
- "Matalan Poised for FTSE Promotion," BBC News, August 24, 2001.
- "Matalan Sees Further Sales Growth in 1999, Margin Growth Slower," Extel Examiner, March 19, 1999.
- "Matalan's Hargreaves Unlikely to Reduce 60 Percent Share Before March," Extel Examiner, October 15, 1999.
- "Matalan Surges on Buoyant Current Trading News," Extel Examiner, October 15, 1999.
- "Matalan to List on LSE by Placing 23.4 mln Shares at 235 p/shr," Extel Examiner, May 7, 1998.
- "Matalan Tops List of FTSE 250 Fallers on Wal-Mart Impact Fears," Extel Examiner, June 15, 1999.
- "Matalan Up As Merrill Lynch Lifts Target Price and Forecast," Extel Examiner, October 19, 1999.
- Mills, Lauren, "Card to Shake Up British Shopping," October 3, 2000, http:www.theage.com.au.
- Walsh, Fiona, and Robert Lea, "Top Trio Plunge on High Street Shock," Evening Standard, January 11, 2001.
Source: International Directory of Company Histories, Vol. 49. St. James Press, 2003.