The accompanying graph tells us all about the task ahead for Ross Sudano, the new CEO of The Reject Shop (TRS).
So far in 2014, the stock has underperformed a sluggish ASX 200 by 50%.
The shares rose 2.4%, or 23c to $9.81 after the new CEO was named.
Profit downgrades, weak sales performance, a still too rapid expansion plan for many analysts – The Reject Shop’s problems are partly the result of the weak trading conditions from autumn onwards, and part self-inflicted.
As well the deep discount space of retailing is not doing well, with consumers avoiding the once popular sector.
Mr Sudano who replaces Chris Bryce (who left in June) takes up his new role on September 11.
You can bet that later this year or in early 2015 there’ll be a new strategic plan announced by the Reject Shop that will involve store closures, restructuring, job losses and asset impairments or write downs, with the losses blamed on the old CEO.
A group of new managers will be recruited over time to help the new CEO lift the company’s performance.
The company said Mr Sudano has had a 20-year career in retailing with a range of companies including Anaconda Adventure Stores, Foodland Associated, Coles and BP.
His most recent role was chief executive of craft brewer Little World Beverages, which was acquired by Lion two years ago.
TRS vs XJO YTD – Big job for Ross Sudano to reform Reject Shop
Last week The Reject Shop’s largest competitor, the Discount Superstores group, which owns Crazy Clarks and Sams Warehouse (owned by former Kathmandu owner, Jan Cameron) collapsed for the second time in just under than two years.
Not helping has been the success at Kmart in the next level above The Reject Shop. Target and Big W (owned by Woolworths) have been doing it tough as well and have been discounting heavily to move surplus stock, especially in the last four months.
And The Reject Shop has also been struggling to control costs and new stores appear to be cannibalising sales at existing stores as the rapid expansion of the past few years continues. That will surely stop, or be slowed over the coming months, if only to preserve cash flows.
Reject Shop chairman Bill Stevens said in yesterday’s statement that Mr Sudano is an "accomplished retailer who will bring deep and broad expertise to all aspects of the business including merchandise buying, supply chain management, product distribution, store operations, and marketing."
“Ross is a proven leader with an impressive track record for achieving strong revenue and profit growth in the retail sector and a reputation for bringing deep insights into the needs and demands of consumers,” Mr Stevens said in a statement to the ASX.
“His focus on driving high performance in a low-cost environment is a great fit with The Reject Shop,” he said.
On June 10, the company downgraded 2013-14’s results in a statement to the ASX, citing the warm autumn and early winter conditions and the downturn in spending post the May federal budget.
"The Chairman of the Reject Shop today announced that the Company was unlikely to meet its Market Profit Guidance for the year-ended 30 June 2014, of between $17 million and $18 million and instead expects to report full year Net Profit after Tax of between $14.5 million and $15.5 million," Mr Stevens said.
"The revised profit forecast of between $14.5 million and $15.5 million includes the impact of costs associated with the opening of a further thirteen stores in the second half, and asset write downs in respect of three stores which are being closed, and a further three stores which are under performing," he said.
Improving that bottom line performance (and lifting comparable store sales) will be the two big tasks of the new CEO.
