FASHION and homeware retailer Matalan signalled that cost pressures which have hurt its profit margins 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 a store at the Ringway Centre at Beck Road in Huddersfield and 212 stores UK-wide, 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 summer stock.

But it said cost pressures had become more subdued and it expected to see the benefits in the pricing of next year’s ranges.

Underlying profits fell by 47% to £41.2m in the six months to August 27, while sales fell by 2% to £526.6m.

June proved a “particularly difficult” month as competitors started summer sales early. Although July and August saw an improvement, September sales were hindered by hotter than usual weather.

Matalan said its outlook remained cautious because the challenging conditions are unlikely to change in the near future.

The company, which is based in Skelmersdale, was de-listed from the stock market in 2006 after it was bought by founder John Hargreaves and his family.

Earlier this year, it appointed former Asda chief merchandising officer Darren Blackhurst as chief executive after Alistair McGeorge left to take over at New Look.