Shares in the Reject Shop have plummeted more than 40 per cent after the discount retailer slashed its profit guidance due to slumping sales.
The company shares shed nearly $2 each to hit $2.50 in early trade after it said sales for the past eight weeks were down 3.9 per cent on the prior corresponding period.
As a result, it cut its first-half profit forecast from about $17.7 million to between $10 million and $11 million.
The Reject Shop shares were still down $1.80, or 40.3 per cent, at $2.67 at 1115 AEDT on Wednesday.
Managing director Ross Sudano called out the impact of recent out-of-cycle mortgage rate hikes, with three of the big four banks plus many other lenders announcing moves since the end of August.
“The continuing absence of real wage growth and increases in the cost of many basic expenses, including mortgage rates, ensures that competition for the discretionary spend of consumers remains high,” Sudano said.
Mr Sudano acknowledged that shareholders who have now seen the stock slide by 85 per cent in the past five years – and by more than 65 per cent since April alone – would be disappointed.
He insisted the retailer was managing inventory well despite sales falling 2.4 per cent over the first 15 weeks of the financial year.
“We are entering our key selling period and have a strong seasonal program in place, with a compelling value offer for Christmas and many tactical activities in place to drive sales,” Mr Sudano said.
“Christmas plans are built on the successes from last year and the early trade of the Christmas merchandise has been positive.”