REJECT SHOP THE LATEST IN A STRING OF RETAILER CASUALTIES

Written on the 23 August 2017 by Business News Australia

REJECT SHOP THE LATEST IN A STRING OF RETAILER CASUALTIES

THE PROFIT margin of discount retailer The Reject Shop (ASX: TRS) has been hammered down 27.8 per cent following a year spent on struggle street in an unforgiving retail market.

The Reject Shop posted a full-year profit of $12.3 million, down from $17.1 million in FY16, as well as an EBITDA result of $38.3 million down 13.4 per cent.

TRS shares have taken a 9 per cent hit following the announcement, and at the time of writing (2:16pm AEST) are trading at $3.99.

Managing director Ross Sudano says there has been a combination of factors that have contributed to the profit decline, including the company's shaky execution of merchandising strategies as well as the faltering general retail market.

"The financial performance for the year has been significantly impacted by the combined effects of weak consumer confidence and execution issues in the implementation of our merchandising strategy," says Sudano.

"We have implemented actions to address this, including better managing promotional activity and the frequency of change in store, and reinvesting in our key everyday lines.

"While this has been an extremely challenging time in the retail industry, our business has emerged through this period in better shape and well placed to deal with the impacts of the external factors that influence retail."

The Reject Shop is not the first big-brand retailer this year to have experienced its fair share of woes in the market.

Topshop went into administration in May and exited Australia, leaving major shareholder Myer (ASX: MYR) in the lurch by $45.6 million as it was forced to write off the value of its stake.

Shares in fashion retailer Oroton (ASX: ORL) also plunged 20 per cent in a single day of trade in May.
Citing a period of low consumer confidence, Citi analysts predicted Oroton would either need to sell off its brands to an overseas buyer or quit the ASX in order to survive.

In the year ahead, The Reject Shop plans to introduce a new loyalty platform, improve its promotional communications and reduce costs in an effort to repair its financial performance.

The Reject shop has decided not to declare a full-year dividend.

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Business News Australia

 
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