Reject Shop shares are on a tear as profits and sales surge

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The Reject Shop has returned to growth, today posting a 43% rise in half year profit to $18.3 million.

Sales at the discount variety store chain rose 5.6% to $424.7 million. And comparable store sales grew 4.4%, a significant improvement on the 3.3% fall for the same period last year.

A short time ago, Reject Shop shares were up more than 24% to $12.55.

Retailing in Australia is currently a challenging environment. According to the Bureau of Statistics, retail sales for December came in flat. At 0.02%, it was the smallest monthly increase since July 2015 when sales fell by 0.1%. Annual retail sales growth is running at 4.19%.

Reject Shop managing director Ross Sudano says the plan to improve sales is gaining traction despite being in the early stages.

“Our strategy is focused on creating a distinctive offer in the market through better understanding our customers, and improving productivity and efficiency to lower our cost of doing business,” he says.

“Early signs are positive in terms of customer transactions, customer feedback and underlying performance. The discount sector continues to grow in relevance and we are ideally positioned to capitalise on this.”

He says the momentum of the first six months continued into the first six weeks of the second half with comparable store sales growth continuing at a rate consistent with that recorded in the second quarter.

The company opened 8 new stores in the six months to December while closing 3 and relocating 2. The total number of stores is 338.

An interim dividend of 25 cents per share, up from 16.5 cents, was declared.

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