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Negative same-store sales weigh on The Reject Shop’s profit in first half

Discount variety store The Reject Shop booked $10.6 million in net profit after tax in the first half of FY19, around 40 per cent less than the $17.7 million of profit it posted in the previous corresponding period, which was in line with its guidance.

Comparable sales were down 2.6 per cent over the half, which the business said reflected the difficult trading environment in September, October and November.

“This has been an extremely challenging period to be operating a retail business and the retail sector as a whole has felt the impacts of lower consumer confidence, flat wages, changing spending patterns and the rise in energy costs,” The Reject Shop managing director Ross Sudano said.

“The Reject Shop has not been immune from these factors… [However], we were extremely pleased to deliver strong performance in the Christmas trading period, which is the most important trading period of the year for The Reject Shop.”

Sudano said the team is in the final stages of its “Brilliant Basics” change program to drive future growth, which contributed to a 0.2 per cent rise in comparable sales in December.

This increase was short-lived, with comparable sales down 2.8 per cent in the first seven weeks of the second half of FY19. The business expects to see net loss of between $6.5 and $7.5 million in the second half of FY19.

“This means the updated full year NPAT guidance range is $3.1 million to $4.1 million,” Sudano said.

The Reject Shop chairman William J Stevens took the opportunity to address the “unsolicited and inadequate” take-over bid made by Allensford Pty Ltd, once again urging shareholders to reject the offer.

“Allensford questioned the basis for the profit guidance and they questioned how The Reject Shop could maintain guidance in the face of November sales,” Stevens wrote in a statement to shareholders.

“With guidance now met, and from the result of actual sales, Allensford’s speculation has proven to be unfounded.”

The takeover offer was previously extended into March to shareholders time to consider the company’s first-half results before making their decision.

“The outlook for retailers continues to worsen and like-for-like sales for most retailers has been challenging,” Allensford director Nick Perkins said.

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