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The Reject Shop hit by CBD exodus

The Reject Shop provided shareholders with a trading update on Friday, largely disappointing shareholders with a bleak review of conditions impacting sales in key CBD and large shopping centre locations as a result of reduced traffic.


Trading update


At its half-year results announcement in February, the Reject Shop noted that COVID-19 continued to impact sales performance during the second half with sales adversely impacted by the lockdowns changing border restrictions around the country. It also noted that stores in CBD locations and large shopping centres continued to be negatively impacted by reduced footfall. Adding to concerns, were that ongoing challenges in the international supply chain were expected to result in increased costs during the second half.


Since that half-year results announcement, The Reject Shop has confirmed that trading activity has continued to be challenging. The company’s stores in CBD locations and large shopping centres, typically in metropolitan areas, continue to trade well below pre COVID-19 levels.

Preliminary comparable sales numbers for the 48 weeks ended 30 May 2021 were down 1.4% compared to FY19. FY19 enables a comparison with pre-COVID-19 trading conditions given the second half of FY20 included the impact of COVID-19 related panic buying. In addition, the company continues to incur materially increased supply chain costs, particularly higher international shipping costs as well as costs associated with holding inventory due to international shipping delays.


Guidance


While TRS has noted that it has been working to offset these headwinds through cost reduction, they expect full-year sales for FY21 to be in the range of $776 million and $778 million and EBIT for FY21 to be in the range of $8 million and $10 million. The forecasts have been qualified by the fact that trading conditions remain unpredictable during June, particularly in light of the current COVID-19 lockdowns and restrictions.