Reject Shop to delay rent payments

The retailer has done a deal with landlords to postpone its April rent by 30 days and is asking suppliers to wait for their payments.

The Reject Shop raised $25m in new capital from shareholders last month, but there was a $15.6m shortfall that was picked up by sub-underwriters to the issue. Picture: AAP

The Reject Shop is making its cash flow stretch as far as possible to keep its business afloat during the coronavirus pandemic, winning a deal with landlords to postpone paying its April rent by 30 days and asking suppliers to wait an extra 30 days for their payments.

The discount retailer has also been forced to slim down its workforce in the face of the massive drop-off in foot traffic at shopping centres and suburban shopping strips, making 20 per cent of its buying and operations teams at head office redundant, The Australian can reveal.

The Reject Shop raised $25m in new capital from shareholders last month, but there was a $15.6m shortfall that was picked up by sub-underwriters to the issue.

The business has been under pressure for years.

In 2019 it lurched to a $17m loss and breached its lending covenants.

“We are in very uncertain times and facing a future that is very different from what we have known. Our entire business has rolled up its sleeves to help navigate a future that is unfolding by the hour,’’ The Reject Shop chief executive Andre Reich told The Australian on Thursday.

“Through this unprecedented period of mass retail store closure, we have asked our team and our stakeholders to work with us to ensure we can continue to serve all Australians with essential low-price products.

“In order to get through this period, we must find simpler, efficient and low-cost ways to do business more flexibly.”

The retailer is acting quickly to save the business and its employees as the nation’s retail sector faces the worst trading conditions in decades.

Mr Reich told staff in an email obtained by The Australian that Reject Shop had secured a short-term reprieve from its landlords and would ask its suppliers to help out in this highly volatile market.

“In response to the unprecedented crisis and the pending downturn in trade, we will take some decisive and immediate short-term measures to assist us to continue to trade through this time of great uncertainty,’’ Mr Reich said in the email.

“Last week we suspended our rental payments to our landlords, and this week we have delayed payments to our suppliers in order to provide us time to adjust our business to the changing economic environment.”

The Reject Shop was to pay its rent for April on April 1 but has won a reprieve to pay it at the end of the month.

It comes as a major battle is looming between retailers and shopping centre landlords over the payment of rent at a time when many shopping centres are deserted and stores have closed their doors and stood down staff.

Billionaire retailer Solomon Lew has closed his stable of 1200 fashion stores and refused to pay rent while they remain shut, and other chains are rallying to his flag. But unless the federal government steps in to resolve the conflict the refusal to pay rent could see some stores evicted and parties end up in court.

In a letter to the suppliers, The Reject Shop said issues surrounding coronavirus (COVID-19) had created “unforeseen challenges for the community, including for The Reject Shop and many other businesses”.

“In response to the unprecedented crisis, we intend to take some short-term measures to assist us to continue to trade into the longer term. One such measure is that we propose to delay all supplier payments by one month to provide us with some time to talk to you about longer term arrangements.

“We appreciate that this decision may have some repercussions for you, but in the circumstances we consider that it is a necessary step (albeit highly undesirable). We value those suppliers that want to partner with us for the longer term.”