CITY analysts have revised down their profit forecasts for budget retailer Matalan after Christmas sales fell 5.5%. The disappointing figures for the 10 weeks to January 7 were blamed on the poor performance of home and festive gifts at the Skelmersdale-based group. "We are disappointed with the home area," said chief executive Justin King. "I think trading will remain tough. I don't see that going away." The figures were an improvement on the 10.6% fall in sales for the nine weeks for October 29 but analysts were unimpressed, forecasting full-year profits of between £55-60m, down from earlier projections of £64m. "There's always a problem with Matalan somewhere in the business and there's always an excuse," said one.. Matalan, with around 190 stores, said sales of non-reduced clothing had risen by 0.3% over the same period. It added demand for seasonal products such as knitwear and coats led to the improvement in clothing sales over the second half of the 19 week trading period - which overall fell 4.8%, and were down 1.9% when cut-price clothes were not included. Total like-for-like sales dropped 7.6% in that 19 week spell. Matalan decided to reduce the number of promotional items it had on sale in a bid to boost profitability. Mr King said that in a "tough trading environment" the retailer had managed to maintain its 3% market share on clothing, which represented 80% of its sales. "Home and Christmas gifts performed poorly and actions are underway to address this," he said, adding that the firm would continue to focus on improving margins and cashflows. Richard Ratner, an analyst at stockbrokers Seymour Pierce, said he was cautious about the prospects for Matalan. "In what has become an over-crowded value sector, Matalan is a long-term loser being squeezed between the out-of-town superstores and the high street. "While the company professes its market share in clothing has held, we are still sceptical about its long-term raison d'etre." tonymcdonough@dailypost.co.uk | 
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