Reject Shop shares plunge as sales slump slices profit

SHARES in the Reject Shop plummeted close to 40 per cent after the discount retailer slashed its profit guidance due to slumping sales.

The company shares shed nearly $2 each to hit $2.50 in early trade after it said sales for the past eight weeks were down 3.9 per cent on the prior corresponding period.

As a result, it cut its firsthalf profit forecast from about $17.7 million to between $10 million and $11 million.

The Reject Shop shares closed yesterday down 39 per cent, or $1.74, at $2.73.

Managing director Ross Sudano called out the impact of recent out-of-cycle mortgage rate hikes, with three of the big four banks plus many other lenders announcing moves since the end of August.

“The continuing absence of real wage growth and increases in the cost of many basic expenses, including mortgage rates, ensures that competition for the discretionary spend of consumers remains high,” Mr Sudano said. He acknowledged that shareholders who have now seen the stock slide by 85 per cent in the past five years – and by more than 65 per cent since April alone – would be disappointed.

He insisted the retailer was managing inventory well despite sales falling 2.4 per cent over the first 15 weeks of the financial year.

“We are entering our key selling period and have a strong seasonal program in place,” Mr Sudano said.