The Reject Shop touts turnaround as same-store sales grow

The Reject Shop has announced a 0.3 per cent year-on-year increase in same-store sales for the first 15 weeks of FY20, its best Q1 comparable sales performance in four years.

“While only in the early stages of our turnaround, I’m pleased to communicate a return to positive comparable sales,” Dani Aquila, the discount retailer’s acting CEO, said in a trading update on Wednesday.

The uplift comes after a 2.5 per cent decline in same-store sales in the second half of FY19. The retailer ultimately posted a full-year loss of $16.9 million including a $15.4 million write-down on the value of its assets and goodwill.

The Reject Shop attributed the poor performance to its decision to deviate from low-priced everyday items, which led to a drop-off in footfall and transaction values. Full-year sales were down 0.8 per cent at $793.7 million, despite a net increase of six stores.

The business also has faced a leadership gap, with CEO Rob Sudano departing in May. Since taking over as acting CEO, Aquila has focused on returning The Reject Shop to its core focus as a discount variety retailer.

“We need to continue to focus on established discount categories. Going forward, this means a substantial investment in non-discretionary and low-priced accessory based categories that provide easy solutions for customers,” Aquila said at the AGM on Wednesday.

“A further tactic will be to promote increased deals that offer our customers substantial discounts on well-known and established brands.

“This will naturally combine with reinforcing our value proposition through product placement, pricing and promotions.”

Aquila said the business would focus on lower and simpler prices, increase its investment into popular selling categories and expand its range to appeal to a younger demographic for the rest of FY20.

Chairman Steven Fisher, who took over from former chairman Bill Stevens who stepped down in August, said the company also would take a more aggressive approach to occupancy costs.

“It is not sustainable that rental increases are running at between 2 and 3 time the CPI index, in an environment of low wage growth and record low interest rates,” he said at the AGM.

“The company will have no hesitation in exiting leases where the occupancy costs do not meet our rent to sales criteria. This approach may see further store closures, and in some cases relocation to more affordable opportunities.”

The retailer said on Wednesday that the selection process for the next CEO is well advanced and that it expected to make an announcement in the next six to eight weeks.

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