Reject Shop feels the squeeze

THE Reject Shop’s new chief executive, Ross Sudano, just can’t catch a break.

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THE Reject Shop’s new chief executive, Ross Sudano, just can’t catch a break.

Only 30 days into the job at the helm of the discount retailer he faced his first shareholders’ meeting yesterday where he was forced to deliver a warning of a sales slump for the start of the new financial year, while outside National Union of Workers members howled chants over pay and conditions at the retailer’s Melbourne distribution centre.

Before the annual general meeting, where chairman Bill Stevens told investors poor conditions that dominated fiscal 2014 had spilled into the first quarter to sink sales by 5.4 per cent, Mr Sudano told The Australian The Reject Shop had a strong future despite being squeezed by nationals such as Kmart and Big W at the top end and independent $2 bargain shops at the bottom.

Mr Sudano said he would continue to refresh the entire Reject Shop network to devote more space to categories that were driving growth and cut back space given to laggard products.

An initial re-lay of its stores had already shown good results, Mr Sudano said.

“There was a long overdue focus on using (growth) categories and we have opened up space for pet products, such as toys, gardening, party needs, confectionary, cleaning products and for us they are key drivers,’’ he said.

The Reject Shop, whose net profit dropped 26 per cent to $14.5 million in the year to June, had stripped back space for candles, socks and underwear.

The Reject Shop has come under intense competitive pressure as larger national discounters such as Big W, Target and Kmart use their buying power to screw down prices and directly compete with The Reject Shop’s status as the leading discounter. And at the smaller end of the retail spectrum, the proliferation of $2 shops in shopping centres and suburbs has also grabbed the attention and loyalty of shoppers.

“Can we exist in that segment? Absolutely and I think there is room for us to grow beyond what we have been doing and I think that will come back to realigning our business around a core value proposition and that everything we do communicates that every single day,’’ Mr Sudano said.

“These are not things we have got right in the recent past and there are opportunities to do it differently. There is definitely a space in the market, it is up to us to be more nimble and not play Kmart head on for example, because they are bigger organisation with deeper pockets, and not to be too slow and lumbering that we can be beaten by the small chains and independent store ­operators.”

Mr Stevens said an added drag on The Reject Shop was a shift by shopping centre landlords to devote more space to entertainment, such as movies, bars and games, which was causing money normally spent on discretionary retail purchases leaking into other retail categories.