Under-pressure retailer The Reject Shop says it expects half-year profit to match earlier guidance, but the firm circling for a takeover wants a clearer picture of the company’s Christmas sales performance.
The Reject Shop announced after the close of trade on Monday it is expecting its net profit after tax to be roughly $10.5 million in the six months to December 31, in line with October and December forecasts.
Chairman Bill Stevens said the expected result hinted at the discount retailer’s long-term growth prospects, despite speculation over the company’s profitability by the Germinder-family backed Allensford Group, which has a $78 million takeover on the table.
‘Notwithstanding the ongoing challenges of a very competitive retail environment, our team members responded in presenting a November and December store offering that was well supported by our customers,’ Mr Stevens said.
However, Allensford says The Reject Shop’s trading update is incomplete and demands it disclose to shareholders the makeup of its sales performance over the critical holiday period.
‘The market has heard soft sales commentary from retailers, retail analysts and industry organisations following the critical Christmas trading period, but TRS shareholders have not yet seen a sales update,’ Allensford director Nick Perkins said.
‘In the context of yesterday’s profit update, the absence of a sales update is significant and of concern for shareholders.’
In October, The Reject Shop cut its profit guidance by about 40 per cent from $17.7 million to between $10 million and $11 million.
Mr Stevens urged shareholders to reject the subsequent $2.70 per share offer bid from Allensford, accusing the Geminder family of trying to get the retailer ‘on the cheap’.
Mr Perkins said on Tuesday the company needed to understand its shareholders were wise enough to understand that short term profits can be achieved by managing costs, but this may come at the expense of the medium-term health of the business.
‘Given the steep decline in sales performance since August, Allensford believes it is incumbent on the TRS Board to provide an immediate sales update to shareholders,’ Mr Perkins said.
The Reject Shop board continues to urge shareholders to reject the offer.
Shares in the retailer were up three cents to $2.75 at 1029 AEDT.
The company’s stock sunk to as low as $2.02 in November from nearly $15 in August 2016.