Finally there are signs in the half year report of The Reject Shop (TRS) after more than a year of battling weak demand and self inflicted marketing and stock woes.
TRS has delivered a 1.1% lift in first-half profit to $17.7 million, just above the upper end of its guidance of $16 million to $17 million. Sales rose 1.1% to $437 million.
In quantum it wasn’t a result to boast about, but in the scheme of things and in view of the company’s most recent woes, it was a breath of fresh air so far as investors are concerned.
The news saw the shares surge 13% to $6.67.
Chairman Bill Stevens said a greater focus on everyday items – such as laundry powder and tissues – has attracted more shoppers, especially over the Christmas period, and helped the company do better than it has in the past couple of halves.
However, the boost in foot traffic was offset by customers on average taking fewer items to the checkout, Mr Stevens said.
Still, comparable store sales rose 0.4% despite weaker economic conditions and tougher competition in Western Australia.
Overall sales were boosted by six new stores opening during the period, six opening the previous year and three relocating within the half.
Turnover of branded products had also improved, managing director Ross Sudano said.
"The availability of key selling lines are at the highest levels we have seen in our business for some time," he said.
Gross margins also rose, by 0.5%, with fewer in-store markdowns and promotions needed due to a more balanced range of products and the well-managed movement of stock.
Mr Sudano said the year’s second half to date had seen comparable sales growth of 1.3%, despite the New Year’s Day holiday falling within it rather than within the first half as it did last year.
“The company is confident that recent positive comparable sales trends in the range of one per cent to two per cent can continue throughout the remainder of the (second) half,” he said in yesterday’s statement.
The Reject Shop kept its interim dividend at 24 cents, fully franked. That’s a cautious outlook.
