The Reject Shop (TRS) sprang a major improvement on the market yesterday reporting its first profit growth in four years and boosting interim dividend 50% and the shares surged, rising almost 24% to $12.50 as investors tried to hop on the bandwagon.
The shares had risen 83% in the year to Tuesday, as investors bought into the revamp plan and picked up on early signs of improvement in the six months to last June.
But they surged from the opening yesterday after it revealed the most impressive result so far this reporting season and have now more than doubled in the last 12 months.
The 23% plus gain was maintained in the afternoon easing in the ASX.
TRS 1Y – Investors accept reject shop with open arms
The discount retailer showed the benefits of a revamp in the way it sells to customers which has seen the top to bottom reworking of its stores and advertising, as well as cutting costs and improving logistics.
As a result, it produced a 43% jump in net profit from continuing operations to $18.3 million for the December half year.
Interim dividend was boosted by 8.5 cents a share to 25 cents as directors rewarded shareholders who stuck with the company through the lean years in the wake of the big Brisbane floods in early 2011, which nearly sent the company to the wall, its struggle to overcome that blow and then sluggish retailing conditions as it lost its way with its core customers.
Sales rose 5.6% to $424.6 million, underpinned by solid same-store sales growth of 4.4% and the opening of eight new stores.
The company said same-stores sales rose 3.2% in the December quarter, slower than the 6.1% surge reported for the three months to September. That was a significant rebound from the negative same store sales growth in the same two quarters of the December 2014 half year.
The improvement was driven by higher sales of groceries, pet care and garden products as the retailer moves deeper into its five year turnaround plan that has seen it add a growing range of products in the toiletries, confectionery and pet product categories.
Reject Shop has also boosted its TV, catalogue and digital marketing to improve brand awareness, is building a digital customer database calling in its campaign “Savvy Shoppers” simplifying its supply chain and negotiating rent reductions or closing underperforming stores.
