Like all retailers at the moment, The Reject Shop expects retail conditions to remain challenging, but at least they’re able to face it with confidence after reporting a profitable growth for the first half year.
The company’s NPAT was reported at $20.1 million, a 21.2 per cent increase the prior corresponding half. This reflects sales growth of 11.9 per cent with positive comparable store growth of 2.1 per cent. This is the fifth consecutive quarters of positive comparable store growth since re-opening its Ipswich distribution centre.
Managing director Chris Bryce said the solid performance is reflection of the company’s ability to build its business in a tough market.
“Our trading is a reflection of our commitment to maintaining high store standards and to delivering a product offer which is both relevant and represents value for money. In addition we continued to invest in building our overall brand awareness as we expand our overall store presence across Australia. Most importantly a range of initiatives deferred as a result of the 2011 floods were able to be advanced; in particular the enhancement of our merchandise planning systems and revisions to our overall supply chain,” he said.
The company managed to open 17 new stores while relocated two existing stores.
“We are extremely pleased at the trading in the majority of our existing stores, with only a small number of stores, primarily in larger centres, dragging down overall sales growth,” Bryce said.
“We have achieved positive outcomes on renewal of leases this year to date and will continue to negotiate strongly on all future renewals. As previously indicated, we are prepared to exit stores where occupancy costs are unrealistic or the long term viability of the retail precinct is questionable. Some of our stores within larger shopping centres are high on our priority list for further discussion with our Landlords.”
During the second half the company expects two store closures as a result of centre redevelopments as well as the closure of its temporary store. The planned closures will re-open at the completion of centre works, likely in FY2014.
Commenting on current trading conditions Bryce said the first seven weeks of the second half have yielded positive comparable sales.
“We believe we have opportunities to continue to grow sales in our existing stores albeit in a retail environment which remains hard to predict. In addition to driving sales, we will continue to focus on all areas of our business to drive profitability, with particular emphasis in the short term on occupancy costs and supply chain improvements,” he said.
However, the company has not provide a guidance for the year believing the new store opening will have an impact on overall profit for the second half.
“We are not providing definitive guidance for the year given the influence and impact the new store opening program will have on our overall profit for the second half,” Bryce said.
:We expect to deliver continuing growth in sales and a solid baseline profit growth overall from our existing stores. However, the opening costs of the new stores in the second half will outweigh the profit contribution of these additional stores in this half; however they will provide a significantly higher store base to start FY2014.”