The Reject Shop’s share price collapses as sales forecast slashed


Posted

October 17, 2018 15:02:33

The Reject Shop has lived up to its name — spurned by investors as it slashed its profit forecast, triggering a 44 per cent slump in its already battered price.

Key points:

  • The Reject Shop says sales are down 3.9 per cent over the past two months compared to a year ago
  • The company has warned investors that first-half profit may be as much as 44 per cent lower than previous forecasts
  • Reject Shop shares fell as much as 44 per cent and have lost about half their value since the start of the year

Ahead of its annual general meeting (AGM), the discount retailer warned shareholders that same-store sales were down 2.4 per cent over the first 15 weeks of the financial year.

That has prompted The Reject Shop to slash its profit forecast from $17.7 million to between $10 million to $11 million for the first half of the year, unless there is a dramatic turnaround in sales between now and Christmas.

The first half is most retailers’ best half of trading in the run-up to Christmas.

Shareholders reacted by fleeing the company, pushing its share price down more than 44 per cent at one stage. The Reject Shop was trading 36 per cent lower at $2.88 by 1:50pm (AEDT).

The company had already lost about 20 per cent of its value so far this year, and its share price was a long way off its record high above $18 back in October 2010.

The company’s managing director, Ross Sudano, blamed the sales slide on an “extremely challenging consumer environment”, rather than any problem with the company’s strategy or execution.

“The continuing absence of real wage growth and increases in the cost of many basic expenses (including mortgage rates) ensures that competition for the discretionary spend of consumers remains high,” he noted in the market statement.

“In addition, we have seen increased investment in promotional pricing across many retailers, particularly in the fast-moving consumable goods (FMCG) space, resulting in additional investment in our FMCG pricing to ensure our value proposition is not damaged.”

The most recent retail sales estimates from the Australian Bureau of Statistics have shown moderate growth in sales over winter, with turnover up 0.3 per cent in August, following a flat month in July and a 0.4 per cent rise in June.

However, The Reject Shop said the sales slump really began in September and October, with comparable sales for the past eight weeks sliding 3.9 per cent.

Topics:

retail,

company-news,

economic-trends,

business-economics-and-finance,

australia



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