Reject Shop warns of lower H1 profit

The Reject Shop (TRS) has warned first-half net profit is set to fall and announced a lift in first-half sales after opening 33 new stores during the six months to December.

In a trading update to the Australian Securities Exchange, the retailer announced sales in the six months to December 2013 of $385.5 million, a 17.7% lift on the six months to December 2012.

But the group said it expects net profit after tax for the half of between $16.6 million and $16.9 million, lower than the $20.1 million posted in the previous corresponding period, which included an insurance recovery of $2 million.

First-half underlying earnings before interest, tax, depreciation and amortisation, and pre-store opening costs, are set to be between $36.5 million to $37 million, a lift of 5.2% to 6.6% on the previous corresponding period.

The Reject Shop said gross margin performance is below plan and below the prior corresponding period.

For the full year, the group expects net profit after tax to be in the range of $17 million to $18 million.

The retailer said comparable store sales were flat overall with disappointing sales over the peak weeks before Christmas, despite trading positively for most of the half.

Stores in major shopping centres dragged down good growth in other locations, the group said.

The retailer expects to open another 12 new stores in the second half of fiscal 2014.

Managing director Chris Bryce said the overall result was well below expectations.