Discount retailer The Reject Shop (ASX: TRS) Limited had a most dreadful start today. In the early trade this morning TRS share price crashed as much as 44% to stand at $2.50. However, the sell-off seems to get little soften as currently The Reject Shop’s stock is trading at $2.960, down 33.781% (17 October 2018, 12:13 PM AEST).
But what suddenly made the company to have such a mournful start?
With no surprise it’s the last 15-week performance of the company. Today morning, The Reject Shop Limited released its trading update for the FY19 first 15-week ahead of its Annual General Meeting due to be held in afternoon today.
Yes, you are guessing it right! The update has unveiled the downturn in Reject Shop’s trading performance as comparable sales has fallen to negative 2.4%. The cut was so deep that company downgraded its guidance for first half of Fiscal 2019.
As announced earlier at the time of FY18 results, the company was expecting to report $17.7 million NPAT in H1 FY19 on the back of comparable sales consensus of approximately 1% during the period. But now the picture does not exist to remain the same as the company has revised its H1 FY19 NPAT guidance downwards to between $10.0 million to $11.0 million.
None of the marketing and merchandise plans, and in store execution outturned in favor of the company as it continuously struggled to uplift its comparable sales to positive amid challenging retail environment. And finally failed in first 15-weeks!
Managing Director of The Reject Shop, Ross Sudano highlighted the reasons that bottleneck the performance growth of the company. He explained that the challenging consumer environment ahead of no growth in real wage as well as upsurge in cost of basic expenses like mortgage rates, held back consumers to spend discretionary.
The company informed that comparable sales for the last 8 weeks have drastically fallen to -3.9%, whereas just at the start of new financial year the company was trading better at -0.5% comparable sales for the first 7 weeks, expecting to improve over the period of time. But rather it has gone worst to -2.4% comparable sales for FY19 year-to-date.
Mr. Sudano told that company has experienced increased investment in promotional pricing across several retailers, especially in Fast-Moving Consumable Goods (FMCG) that led to additional investment in FMCG pricing by the company to ensure there is no damage caused to value proposition.
Acknowledging the disappointment among TRS shareholders, Mr. Sudano ensured that company is striving to achieve profitable growth going forward underpinned by strong seasonal programs that company has planned for Christmas sales.
Now, it’s important to watch what company comes up with in its Annual General Meeting. Although the stock has fallen as much as 44% in today trade, it has seen a slight positive performance change of 2.05% over the past one year.
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