Matalan pay price for market share

All,

We are still looking for the gloss on Matalan’s numbers this morning. Q3 results are well below expectations. 

Call is at 10.00 am - see details on our calendar.

Sales were actually slightly ahead of model, suggesting the company has taken market share - most likely because of a frantic effort to sell down its stock, managing inventory, not margin.

So Gross Margin fell short by £6m, which could only partially be made up by better - almost radical savings in Other Costs, which are hopefully not just temporary.

Thus EBITDA was £-4.7m lower than model, continuing the weak performance from Q2.

It seems Matalan will have likely taken some market share - but have paid for it. The same ~£5m are missing from OCF (Taxes, WC, Other in line with model) and from FCF (CapEx in line with model). 

Thus finally Cash falls short by the same ~£5m amount with £73.1m.

Stock seams to have been clean going into Q4 (Dec to Feb). But we know that pre-christmas discounting was aggressive across retail. 

LTM leverage for our SSNs therefore has crept up to from 2.9x to 3.1x

Wolfgang