Like many of its rivals, discount retailer The Reject Shop (TRS) has had a good pandemic using the surge in demand from consumers to haul itself back into profit in the year to June.
Higher demand (a story repeated at Coles, Woolies, Bunnings, Officeworks, and many other retailers) saw solid sales growth off the back of coronavirus panic buying.
Annual sales rose 3.4% to $820 million with comparable sales (the best measure in retailing of sales performance) up 3.5%.
Like Woolies, Coles, and Metcash, TRS saw strong rises in sales of cleaning products, toiletries, pet care, and toys.
Statutory net profit after tax was $1.1 million, a huge improvement on the 2019-20 loss of $16.9 million, achieved largely via cost-cutting across the company’s workforce which saw Reject Shop reduced its head office staff by 20%
Earnings Before interest and tax (a key measure of profitability in retailing) was $4.5 million, up from the $23.3 million loss for the previous year.
Cash on hand was $92.5 million thanks to the company’s $25 million capital raising in March.
But that wasn’t enough to convince investors the retailer has turned the corner and the shares fell more than 14% to $6.68.
They were more concerned with the slide in sales since balance date thanks to the second round of lockdowns in Victoria and especially Melbourne.
TRS said sales fell 2.4% in the first seven weeks of the new financial year, mostly because of the tighter restrictions in Victoria where the company has 81 stores along with a distribution centre.
There’s no dividend.
