Despite posting a 7.3 per cent increase in sales to $505.1 million for the 2011 financial year, The Reject Shop has reported a 31 per cent decrease in total annual profits down to $16.2 million after being heavily impacted by Queensland floods that forced the closure of its Ipswich distribution centre.
The Ipswich Distribution Centre, which serviced approximately half the company’s sales, was closed in January as a result of the Queensland floods.
Managing director Chris Bryce has describe 2011 has the company’s most difficult period it has faced.
“This has been the most challenging year in the Company’s history, with the bulk of the second half focused on recovering from the loss of the Ipswich Distribution Centre. The impact of the closure on the Company’s sales and costs has been pronounced and has required a Company wide effort to recover. Notwithstanding the difficulties experienced, I believe the Company has met these challenges exceptionally well in the circumstances, however progress on a number of identified strategic opportunities, in the short term, has been delayed,” he said.
“Despite the Ipswich Distribution Centre closure, the Company continued to grow its store network with 23 new stores opened during the year, as well as relocating four existing stores.”
Comparable store sales were also affected. While it were positive in the first half, comparable store sales were down 1.5 per cent at the end of the 2011 financial year due to losing a “significant proportion” of its inventory in the floods.
“Comparable store sales to date this year have been negative but as we are still operating with only partial capacity at the Queensland Distribution Centre and comparing against a particularly strong sales period for July and August in the 2011 financial year, this is not unexpected. Taking all factors into account, achieving comparable stores sales growth in the first half of 2012 financial year will be challenging,” Bryce said.
The Reject Shop also highlighted that the company is like many other retailers that are feeling the pressure of the slow consumer sentiment.
“It is clear however that the current retail environment is challenging and may well have been further impacted in recent weeks by global issues. Consumers are likely to remain cautious in the short term and any upward movement in interest rates or the cost of essential services, could further erode trading conditions,” Bryce said.
“What makes the current financial year even more challenging for us is that a number of factors, which can influence both our trading ability and therefore our overall profit result, remain outstanding. These include the final costs associated with the re-opening of the Queensland Distribution Centre and the rebalancing of our overall stock between Melbourne and Ipswich.”
To move forward from this, the company has reopened its Queensland distribution centre and looks to continue its long-term growth plans including opening new stores, making improvements to merchandise planning, and building on brand awareness.