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Matalan signals an ease in cost pressures

By Peter Cripps

Published 19/10/2011

Fashion and homeware retailer Matalan yesterday signalled that the cost pressures which have hurt its margins in recent months were starting to ease.

The update offered more reassurance to shoppers after Next recently said there will be little to no inflation in its 2012 prices after the cotton price bubble burst.

Matalan, which has 212 UK stores, said its profit margins were squeezed in recent months as it struggled to pass on rising prices to cash-strapped shoppers and it put on discounts to shift stock.

But it said its recent cost pressures had been more subdued and it expected to see the benefits in the pricing of next year's ranges.

Underlying profits fell 47% to £41.2m in the half year to August 27, while sales fell 2% to £526.6m.

June proved a "particularly difficult" month as competitors started summer sales early and although July and August saw an improvement, September's sales were hindered by the hot weather.

Sales of ladieswear remained the most challenging area of its offer, it added, although menswear and childrenswear performed well.

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