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The Reject Shop reverses disappointing FY17 results

The Reject Shop has posted a 34.3 per cent year on year increase in net profit after tax (NPAT), earning $16.6 million in FY18, compared to $12.3 million in the prior year.

This brings the company’s position only slightly below it’s 2016 result of $17.1 million, after a difficult 2017 saw profit drop by 28 per cent.

Sales for the year slightly increased over the prior year’s $794 million to $800 million, underpinned by the impact of opening four new stores in FY18, and the continued effectiveness of the six stores opened in FY17. Total stores reached 351 nationally at the year to June 30.

“We are pleased to have generated strong profit growth against the backdrop of a particularly challenging time in the retail industry and in the context of a flat overall sales result,” The Reject Shop managing director Ross Sudano said.

“Our focus on executing our customer driven strategy is unrelenting and we completed several change projects during the year, lifting seasonal sales opportunities while also improving the in-store delivery of our merchandise strategy. The impacts of these change projects appear in stores during the year.”

Sudano said these projects contributed strongly to the improved NPAT, though he noted that sales growth remains the company’s key focus.

The company’s digital platform is expected to drive this sales growth, with a new loyalty program launching in the first half of FY19 to capture data on shopping habits, product purchases and category interests. The intention is to use this data to tailor communications to core customers.

“During the first half of FY19 we will assemble a small team to innovate and build out these sales opportunities,” Sudano said.

FY19 Outlook

A flat comparable sales trajectory has continued into the first seven weeks of FY19, falling 0.5 per cent year to date.

“While we have been successful in increasing basket size in recent months, transaction growth has been more challenging,” Sudano said.

“This indicates that our value seeking customers continue to be discerning as they strive for maximum outcomes for their available discretionary spend.”

The Reject Shop expects to report a first-half NPAT consistent with the first half of FY18, due to improved efficiencies, less associated markdowns, and a continued pursuit of other cost-out opportunities.

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