Allensford jumps on disappointing The Reject Shop results

Allensford jumps on disappointing The Reject Shop results

Allensford is once again gunning to take over The Reject Shop (ASX: TRS) following the group's 1H19 results announcement and full year guidance.

Though The Reject Shop's half year profit was in line with expectations, Allensford is hoping shareholders will jump ship now that the retailer has announced its full year guidance.

Profit for the first half was down 40.4 per cent to $10.6 million, while sales were down 1.1 per cent to $432.7 million.

The company expects to record a loss of between $6.5 million and $7.5 million in the second half of the 2019 financial year, which means full year profit guidance will land between $3.1 million and $4.1 million.

Shareholders have also had their dividends slashed by more than half.

Allensford director Nick Perkins says these results are evidence that shareholders should accept his offer of $2.70 per share.

"The sustained deterioration in The Reject Shop's financial performance over the period and a further deceleration in sales during the first seven weeks of the second half, despite net 10 new store openings, is confirmation that the board's strategy to arrest the long-term underperformance of the business is failing," says Perkins.

The Reject Shop has blamed its low sales on "extremely difficult trading" in September, October and November. Christmas was apparently a boost for the company however.

Managing director of The Reject Shop Ross Sudano says a number of factors out of his control contributed to this disappointing result.

"This has been an extremely challenging period to be operating a retail business and the retail sector as a whole has felt the impacts of lower consumer confidence, flat wages, changing spending patterns and the rise in energy costs," says Sudano.

"The Reject Shop has not been immune from these factors; however, our strategy to implement fundamental change to restore the performance of the business we articulated three years ago is on the cusp of generating real returns and will begin to be reflected in the second half of this calendar year and beyond."

Sudano says the company now hopes to become a leader in the greeting cards and home storage sectors.

"Both have the capacity to be significant sales and gross profit drivers, and the initial results are extremely positive," says Sudano.

Shares in The Reject Shop are down 0.73 per cent to $2.73 per share at 12.15pm AEDT.

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