Reject Shop warns on weak sales growth

Reject ShopThe Reject Shop has warned soft sales growth could lead to a weaker half year performance for the discount retailer.

Chief executive Ross Sudano said a combination of patchy consumer sentiment and poor execution of stock flow have hurt the retailer’s sales.

“We continue to experience patchy consumer sentiment impacted by minimal real disposable income growth, continuing underemployment and declining or stagnant housing price growth,” he told the group’s annual general meeting on Wednesday.

The crucial comparable sales figure, which strip out one-off events like store closures or openings, was 0.3 per cent during the first three months of 2016/17, compared to 6.1 per cent in the previous year’s first quarter.

“Given this current trading momentum, we face a challenge in respect to achieving last year’s half year result,” Sudano said.

He said the group did not forecast the demand for products as well as it could have and the varying availability of items in a number of categories have disappointed customers.

“The growth in promotional sales has also introduced a number of challenges around the flow of stock to stores,” he said.

“At times we have struggled to support both promotional and regular department sales during the first quarter.”

He said the group was working on improving its stock flow.

Sudano said the company has achieved a 5.7 per cent sales growth during the 2016 year and comparable sales growth of 3.0 per cent underpinned by transaction growth from new stores. He said while these are pleasing results, the company’s focus remains on growing their transaction levels to underpin future sales growth by more reliably meeting their customer promise.

He said during the year, the retailer opened 14 new stores and closed six underperforming stores, continuing their focus on ensuring each of their stores is contributing positively to the financial performance of the business.

“This will remain an ongoing focus as we continually refine our store portfolio and has seen a significant change to our store portfolio over two years,” Sudano said.

He also added the construction of a purpose built distribution centre in Melbourne continues and is on plan to be operational by early 2017.

The group has opened seven new stores and relocated one existing store in the first 13 weeks of 2016/17, taking its network to a total of 348 stores.

The Reject Shop made a profit of $18.3 million in first half of 2015/16, with comparable store sales growth of 4.4 per cent.

Shares in The Reject Shop dropped 65 cents, or 6.9 per cent, to $8.80.


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