The Reject Shop Ltd (ASX: TRS) share price fell 6% today after the retailer provided an update to the market on its 2nd half trading performance… and it’s not pretty.
Gross margins are well below management expectations, like-for-like sales are down 2.9% and as a result, full-year profit guidance has been slashed from a profit of
$3.1 million to $4.1 million to a full-year net loss of $1 million to $2 million.
Reject Shop’s CEO Ross Sudano will be moving on with the search for a new CEO to lead the business back to profitability now underway.
What Went Wrong With The Reject Shop & Is It Cheap?
The Reject Shop’s poor business performance has been blamed on low consumer confidence, flat wages, increases in the cost of living and rapidly falling property prices.
These are all likely to remain headwinds in the short to medium term and thus it’s hard to see an imminent turnaround.
For the right price, almost any share or investment can be a good buy. But with low profit margins, falling like-for-like store sales and a bleak retail environment I would need to see the share price fall well below $2 before I became interested in this one.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
Disclosure: At the time of publishing Luke does not have a financial interest in any of the companies mentioned.