Reject Shop chairman Steven Fisher admits errors at 2019 AGM

Reject Shop’s new chair has issued a mea culpa to the company’s long-suffering shareholders and fired a warning shot at landlords.

Reject Shop admits past errors have hurt its profitability.

The Reject Shop’s new chairman Steven Fisher has offered a mea culpa to long suffering shareholders in the discount merchandise retailer, admitting that errors have been made.

Shareholders have suffered many profit warnings from the group and a share price that has collapsed by almost 90 per cent since 2014.

Mr Fisher also fired a warning shot at landlords, telling investors that the company would take a more aggressive approach to rent costs. He said it was not sustainable for rent increases to be running at two and three times the CPI Index in an environment of low wages growth and record low interest rates. The Reject Shop would exit leases that became too expensive, Mr Fisher warned.

In an address to shareholders to be given at the company’s AGM in Melbourne later this afternoon, Mr Fisher pledged to implement plans to address the problems plaguing the troubled retailer.

“As previously stated by the outgoing chairman Bill Stevens, ‘it has been an extremely challenging year for The Reject Shop, and understand that shareholders would be extremely disappointed with the 2019 fiscal year result,’.’’ Mr Fisher said.

“Clearly errors were made, these errors have been identified and are currently being addressed,’’ Mr Fisher said.

In August, the under-pressure discount retailer posted a net loss of $16.9 million, a complete turnaround from the $16.6 million profit made in 2018, as impairments of $15.4 million after tax and a further slip in full-year sales savaged the company’s profitability.

After suffering a string of profit warnings over the last few years and the exit of its chief executive, The Reject Shop posted a 0.8 per cent dip in its sales for fiscal 2019 but pre-tax earnings fell by 57.6 per cent to $18.2 million. Before impairments, it posted a loss of $1.5 million.

Making matters worse in fiscal 2019 the company also revealed it had breached its banking covenants. Its shares have fallen from a peak above $17 in 2014 to as low as $1.93 more recently.

The Reject Shop was recently the target of a $78 million takeover from packaging billionaire Rafael Geminder, who is the retailer’s biggest shareholder with a stake of 19 per cent.

Mr Fisher, who had been chairman of appliances group Breville since 2012, said in his AGM address that the retailer would work to win on “product, price and culture”.

He said that where possible, the retailer has exited product which is not in keeping with the expectations of its customers, and aggressively sourced alternative opportunities to make its retail offer more relevant.

There had been some improvements at its stores, and in a trading update issued on Wednesday, The Reject Shop said comparable store sales of -2.5 per cent in the second half of 2019 had swung around to be up 0.3 per cent in the first 15 weeks of fiscal 2020.

The Reject Shop also echoed comments by other retailers that rental costs were becoming excessive.

Mr Fisher said the company it would walk away from leases that were not competitive or in keeping with the current poor retail environment, and said this could result in further store closures.

The Reject Shop is also getting closer to appointing a new CEO and is seeking additional board members.

Mr Fisher said the company hoped to resume paying dividends as soon as profitability allows.