JOHN HARGREAVES has lined up Alistair McGeorge, the former chief executive of Littlewoods, to lead his potential bid for Matalan, the clothing retailer, The Times has learnt.

Mr Hargreaves, the chairman and founder of Matalan who controls 53 per cent of its stock, is thought to have raised funds for a 180p to 190p a share bid for the retailer, having secured the services of Mr McGeorge if the business is taken private.

Barclays Capital is understood to be providing debt finance for the potential bid and Mr Hargreaves is being advised by PricewaterhouseCoopers.

Mr McGeorge, who became the boss of Littlewoods in 2001, oversaw the sale of the privately owned firm to the Barclay Brothers the following year. He later became chief executive of the firm’s home shopping division when it was split off from the ailing high street stores, but then left the business in July last year.

Speculation about a bid from Mr Hargreaves overshadowed improved trading figures from Matalan issued at the annual meeting. The firm said that underlying sales were down 0.1 per cent in the nine weeks to July 1 compared with a decline of 2.2 per cent in the previous nine weeks. Gross margins improved by 0.4 percentage points compared with a 0.2 per cent fall in the previous nine weeks despite continued sales clearance of this spring’s poor home furnishings range.

Matalan admitted that underlying sales had been boosted by about 1 per cent in the past nine weeks by sales of World Cup-related merchandise and said that the trading environment remained “tough”.

John King said: “It is not getting any tougher but the UK consumer still has the same pressures on them from utility bills and disposable income is under some pressure.”

Eithne O’Leary, an analyst at Oriel Securities, said that Matalan’s underlying sales performance was the best for 15 months. She said: “Overall clothing sales are now inching into positive territory. Home appears to be through the worst . . . Matalan is becoming a strong generator of cash.”

Shares in Matalan dipped 3¼p, or 1.8 per cent, to 171¾p as investors remained sceptical that any firm bid would emerge from Mr Hargreaves and that any attempt at an offer would be pitched low.

Harris Associates, Matalan’s largest institutional shareholder, voted against the reappointment of Mr Hargreaves at the meeting yesterday but he was comfortably backed by the rest of the shareholder base, 92 per cent of whom voted in favour of him.

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