The chief executive of UK retail success Matalan, Angus Monro, has resigned, following pressure from the company's board.

He will be replaced by John Hargreaves, the founder of the retail chain specialising in discount clothing.

The stock market took the news badly. Matalan shares plunged by more than 15% from 549.5 pence to 465p.

Mr Monro had recently announced that he wanted to leave the business in "two to three years' time". Matalan's board of directors, however, believed that this would conflict with its "desire to develop more aggressively [the company's] strategic options".

In a statement, the company said it had been "agreed with him that it is more appropriate that he leaves at this time".

For five years Mr Monro had been in charge of Matalan, and the board praised him for leaving the business in a "sound financial and strong trading position".

Matalan turnaround

Half a year ago, investors had cheered Matalan as the great success story of UK retailing.

But when the company reported in early January that its profit margins would be "slightly lower" than expected, the stock market punished the company by marking down its share price by a massive 46%.

But only hours before the news of Mr Monro's resignation, investor sentiment appeared to turn around in favour of the company.

In a widely watched move, investment bank Goldman Sachs added Matalan to its "recommended list", rating the stock as "outperform".

Goldman Sachs analysts said the retailer's growth story was "firmly back on track", discounting the problems experienced in the second half of 2000 as a mere "hiccup".

In the statement announcing the change at the top, Matalan confirmed that it was on track for its ambitious profit and sales targets, and insisted that profit margins would be "in line with expectation".

But Mr Monro's resignation may now persuade some investors to review their position on Matalan yet again.