Reject Shop steps up push for more stores
Discount retailer The Reject Shop went into a trading halt on Tuesday and announced plans to raise $40 million to fund its accelerated store rollout program into 2014 despite reporting that retail conditions remain challenging.
The Reject Shop will lift its store count of 269 to more than 300 by June 30 next year. The long-term goal remains more than 400 stores nationwide. The aggressive plans could see the company open as many as 50 stores this year.
"While managing this level of growth in the short term is challenging, the future benefits to our business and shareholders should be significant," managing director Chris Bryce said.
The company said the performance to date from new stores opened in the current half-year provided further confidence in the potential of further store growth.
This led to the accelerated investment in new stores being extended into 2014.
The company also reported that comparable third quarter sales, adjusted for Easter, were up 2.9 per cent, compared with a 2.1 per cent rise in the previous third quarter.
Mr Bryce said it was a good performance given the tough trading conditions.
The company said it decided to raise fresh capital, rather than use cash flow and debt for the accelerated rollout, in order to strengthen its balance sheet.
"While the company could fund the accelerated rollout from cash flow and by expanding current financing facilities, we believe the proposed capital raising will create a sound financial platform to support the accelerated store opening program for the next financial year and beyond," Mr Bryce said.
The raising has been structured as a $30 million placement to institutional investors, underwritten by Macquarie Capital, and a non-underwritten share purchase plan to raise up to $10 million for retail investors.
The raising is being priced at $16.20 a share and will account for 7.1 per cent of shares on issue once it is completed. The Reject Shop's shares went into a trading halt on Tuesday, last trading at $16.72.
The Reject Shop said its dividend payout ratio was expected to remain unchanged at 50 per cent of its net profit.