The Reject Shop Post $17M Loss As CEO Search Continues
Struggling discount retailer The Reject Shop has breached its financial covenants and posted an after tax net loss of $16.9 million as it continues to search for a new CEO.
The loss figure was inflated by a $15.4 million non-cash impairment charge relating to a reduction in the carrying value of corporate assets and store assets.
Before the charge, losses were $1.5 million, in line with predictions in May when the company wrote down its forecast, having initially expected profits between $3 and $4 million.
Sales were relatively steady, falling by 0.8 per cent to $793.7 million, but EBITDA fell almost 60 per cent to $18.2 million.
The results mean The Reject Shop has failed to meet its fixed charge cover covenant for June and won’t meet it for September either, but the bank has issued a waiver.
A couple hours into trading, shares in The Reject Shop were down 6 per cent to $2.04.
The Reject Shop CEO Ross Sudano resigned in May of this year, and general manager of the supply chain, strategy and innovation, Dani Aquilina has been appointed acting CEO.
The Reject Shop chairman Bill Stevens, who will retire in October, said the search for a new CEO is “progressing steadily”.
Mr Stevens added the company understands shareholders will be “extremely disappointed” with the results.
“This has been an extremely challenging year for The Reject Shop and the retail sector,” Mr Stevens said.
“We are implementing a new strategy we believe will improve performance to the expectations of our shareholders… we have identified errors and we are actively addressing them,” he added.
Weak trading in Western Australia, Queensland and the ACT is being blamed for offsetting the positive sales impact of the net 10 new stores the company has opened in the last two financial years.
The Reject Shop is banking on a new digital strategy, which is anticipated to yield “a significant benefit” once executed.
Acting CEO Dani Aquilina said The Reject Shop “are getting on with the job of improving our performance”.
“We have a clear understanding of what needs to be done and we are wasting no time.”