The Reject Shop’s sales, profit slump as Covid kept shoppers away from its stores

A drop in customers over the six months to December has led to a sales and profit slump at no-frills retailer The Reject Shop.

The Reject Shop’s financial performance has been hurt by shoppers avoiding high-traffic locations and staying close to home. Picture: Supplied

The Reject Shop has appointed former Officeworks boss Mark Ward to its board as the discount merchandise retailer struggles to attract customers during the pandemic with interim profit down nearly 10 per cent.

The group’s profit dropped to $15.4m for the six months to December 26 from $17m a year earlier, as sales fell 2.2 per cent to $424.7m.

The retailer did not declare an interim dividend, mirroring a cancelled interim dividend last year, as its business struggled through store closures, lockdowns and the emergence of the omicron strain towards Christmas.

The Reject Shop was particularly hit by its concentration of stores in CBD locations which were emptied of shoppers as consumers stayed away from these high-traffic locations and shopped closer to home.

Its stores in country locations proved more resilient and booked a smaller decline in like for like sales compared to city stores.

Reject Shop chairman Steven Fisher said in addition, the omicron variant added further disruption to the already challenged international and domestic supply chains.

“Notwithstanding these challenges, I am pleased with management’s ongoing efforts to keep our team and customers safe, protect gross profit margin, control costs and continue growing our national store network,” he said.

Comparable store sales were down 4 per cent over the six month period.

Sales were impacted by government imposed lockdowns in each of NSW, Victoria, Queensland, Western Australia, South Australia and the Australian Capital Territory as well as changing state border and travel restrictions.

The emergence of the omicron variant during the lead up to the key Christmas trading period resulted in reduced store foot traffic with customers concerned about increasing case numbers in some states.

This resulted in December comparable store sales dropping by around $5.8m from a year earlier.

Similar to most retailers, stores in large shopping centres and CBD locations were most impacted (47 Reject Shop stores) by customer concerns around Covid-19 with comparable store sales down 5.1 per cent and down 14 per cent over two years.

Metro and country stores in neighbourhood and strip locations (179 stores) were more resilient, with comparable store sales down 3.1 per cent and up 1 per cent over two years.

Mr Ward, a 40 year veteran of the retail sector, will join the board on March 1.

Originally published as The Reject Shop’s sales, profit slump as Covid kept shoppers away from its stores