Matalan accused of passing on 2% of costs to suppliers

Aug 20 2008 by Alistair Houghton, Liverpool Daily Post

RETAIL giant Matalan has been “named and shamed” by a business pressure group after asking for a 2% deduction on payments to its suppliers.

The Forum of Private Business (FPB) has added Skelmersdale-based Matalan to its “hall of shame” of companies it says are cutting costs by squeezing suppliers.

The FPB says Matalan has written to suppliers telling them the group intends to use the money it saves to expand retail parks, develop international franchises, expand its online business and refurbish stores.

But Matalan says the move is necessary to help it grow its business and says the benefits of that expansion will be felt across its supplier base.

Matalan was founded by Liverpudlian John Hargeaves in 1985, and has become one of the UK’s leading value retailers. It floated on the stock market in 1998, but was taken back into private ownership by the Hargreaves family in 2006 after the chain’s sales slumped in the face of increased competition from rivals such as Primark.

In June, Matalan said its annual pre-tax profit had risen 89.3% to £53.2m for the 53 weeks ending March 1, compared to the same period last year, despite a slight fall in revenues.

The company said its profits growth was down to improved cost efficiency, tighter stock control and better sourcing and buying.

FPB chief executive Phil Orford said: “This is not the first time that Matalan has passed on costs to its suppliers, and it represents a payment problem that is endemic across a number of industry sectors.

“The fact that this latest charge is being justified to fund initiatives like marketing and international expansion adds insult to injury for many smaller firms, which are struggling to control essential costs as the economic downturn continues.

“I feel sure that many suppliers are already asking why investment can’t be funded by the substantial increase in profits recently announced by Matalan.”

A Matalan spokeswoman said: “Matalan confirms it has written to its suppliers asking for a 2% contribution towards investment in growing our business.”

alistairhoughton