Reject Shop blames theft and cost of living crisis as earnings pinched

Theft, inflationary pressures and cost of living pains have squeezed sales and earnings for the discount retailer, which has traditionally done well in tougher economic times.

The Reject Shop is facing rising levels of theft as well as more cautious consumers.

Discount retailer The Reject Shop is starting to show signs of a recovery thanks to better offers in homewares and seasonal events like Christmas and Halloween, but rising in-store theft combined with supply chain costs and a financially constrained shopper continue to drain its profit.

Operating in a part of the retail sector where shoppers are demanding value for money at a time of pinched household budgets, The Reject Shop said its customers were responding positively to the changes it had made in its stores and across its merchandise offerings.

After a difficult few years that saw a string of profit downgrades and a collapsing share price, recently appointed chief executive Clinton Cahn said in fiscal 2024 the retailer – which operates 385 stores – generated around 2 million more customer transactions than it did in the prior year, reported record full year sales, and recorded positive comparable store sales growth in a challenging economic and trading environment.

On Thursday The Reject Shop, whose largest shareholder is packaging billionaire Raphael Geminder, reported a 54.3 per cent slide in full-year net profit to $4.71m as revenue rose 4.1 per cent to $852.74m. A one off $4.2m gain from an insurance payout boosted earlier results, with adjusted net profit down 35.9 per cent.

In a trading update accompanying the results, the company said sales during the first seven weeks of 2025 were up 1.5 per cent and comparable store sales were up 0.3 per cent.

Over 2024 growth in consumables categories was again strong, as customers continued to visit The Reject Shop for low-priced household essentials that represented great value, particularly branded products. In general merchandise, seasonal events performed well and the ongoing newness and differentiation in its homewares range generated strong sales growth, The Reject Shop said.

With cost of living pressures elevated, sales growth in the more discretionary, commoditised general merchandise products was softer than in 2023 and the company also faced margin pressure from rising costs, higher theft rates and rising domestic supply chain costs.

The company’s balance sheet remains strong, it said, with a net cash position at June 30 of $49.9 million. This compares to a net cash position of $77.3m at the end of June 2023. During 2024, around $15m in cash was paid to shareholders via dividends and the on-market share buyback.

The company did not declare a final dividend but had declared an interim dividend of 10c per share earlier this year.