The Reject Shop shares have plummeted

Reject Shop

The value or stock in The Reject Shop have plummeted after the discount variety store reported a drop in its full-year profit.

In an announcement to the ASX, The Reject Shop revealed that their full-year profit will drop to approximately $12.5 million, citing the wider market as a cause for the loss of profits.

“Assuming current tough market conditions continue through the end of FY17, the Company expects to report a net operating loss in the second half of at least $5 million. This will reduce the full year net profit to approximately $12.5 million,” asserts the announcement.

The Reject Shop have also said that they won’t be able to declare a final dividend, due to a fall in projected earnings per share and working capital requirements.

The announcement has led to a massive drop in the company’s share price. Share prices are down more than 33%, trading at $5.30 a share. This represents a massive decline from yesterday’s share price of $7.92 a share.

The company’s Managing Director Ross Sudano has expressed his concern at the announcement.

“This is a disappointing development for our shareholders and an under-performance. The extremely challenging external environment, as well as execution issues with our merchandising strategy, have combined to deliver a weak sales trend, outweighing the positive sales momentum achieved during December,” Sudano said.

Sudano cited a lack of new products, a focus on too much variety, and difficult market conditions as reasons for the profit drop. However, he assured investors that The Reject Shop is implementing changes.

“We have a strategy to address this by altering our product mix; actively rebalancing marketing activity and in store activity to emphasise a stronger blend of everyday value; and in reflecting this better in our customer communication and in-store presentation.”