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Warehouse challenges have severe impact on Matalan

19 October 2015

Retailer saw earnings nose-dive after warehouse move led to massive stock backlog.

The retailer moved to a new distribution centre in Liverpool earlier this year and problems associated with the move led to the retailer reporting EBITDA (earnings before interest, taxes, depreciation, and amortisation) of £2.3m in the second quarter of this year, a massive fall from the equivalent 2014 figure of £21.9m.

The Q2 results follow a 50% fall in EBITDA in the first quarter.

Managing director Jason Hargreaves said: "The results for the first quarter reflected the impact and scale of the challenges we’ve faced during the transition to our new northern distribution centre in Liverpool, the final stage of our supply chain programme.

"These issues disrupted the flow of stock into our northern stores, compromising product availability. This drove a significant disparity in performance between the northern stores serviced by this new facility and those stores in the south."

The supply chain programme is designed to allow Matalan to more effectively serve customers across a range of formats and channels.

Hargreaves continued: "The results for the second quarter reflect the severe financial impact of the action taken to sell through the unprecedented level of excess spring and summer stock.

"After a significant effort from our warehouse and store colleagues, we closed the quarter with a much healthier seasonal stock package. However, this was only achieved by more aggressive markdowns than initially anticipated.

"The performance of the new distribution centre in Liverpool has improved and we have launched our Autumn ranges across the UK more effectively.

"As we approach peak trading, we continue to carefully manage the demands placed on the new warehouse, including scaling back our online growth expectations for the year.

"A number of key steps designed to improve performance have been identified and are being implemented throughout the business. Implementation is supported by new senior appointments in supply chain, IT, trading and eCommerce.”