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The Reject Shop (ASX: TRS) chairman Bill Stevens claims results announced yesterday should put to bed speculation over poor sales performance from takeover bidder Allensford.
Allensford, a subsidiary of Bennamon Pty Ltd which is owned by owned by Kin Group, made an offer for The Reject Shop in November claiming it could give shareholders "immediate and certain cash value" for a stock whose financial performance was deteriorating over time.
The TRS board rejected the offer as "opportunistic", alleging it took advantage of shareholders and undervalued the stock.
But yesterday The Reject Shop highlighted a preliminary unaudited net profit after tax of approximately $10.5 million for the first half, which Stevens notes is consistent with guidance provided on 17 October which was reaffirmed in a statement on 3 December.
"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," says Stevens.
He highlights the update has been issued in the context of Allensford's takeover bid, which is currently due to close on 22 January.
"Allensford's replacement bidder's statement dated 3 December 2018, together with its second supplementary bidder's statement dated 20 December 2018, contained a number of speculative comments in respect of The Reject Shop's trading performance over the first half of FY2019 that have been shown to be unfounded," he says.
"Amid a backdrop of highs and lows over the past few years, your Board continues to believe in the long-term growth prospects of The Reject Shop's business, which has remained profitable despite the extremely challenging and fluctuating retail environment."
As such, the board has called on shareholders to reject Allensford's offer.
In response, Allensford has slammed TRS' update for not being comprehensive enough, calling on the retailer to disclose its sales performance over the holiday period with the inclusion of sales and cost figures.
The company claims TRS' statatement that it "often traded at a loss" in the second half would mean the FY19 NPAT would be below $10.5 million, representing a year-on-year trade decline of at least 37 per cent.
"Trading Sales performance over the half year is critical information to allow TRS shareholders to make an informed decision regarding the opportunity to sell their shares," says Allensford director Nick Perkins.
"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. In the context of yesterday's profit update, the absence of a sales update is significant and of concern for shareholders.
"Furthermore, the Company needs to recognize that shareholders are 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. This is why sales information is absolutely critical."
The Reject Shop will provide more detailed on its results after they've been audited, in accordance with a scheduled timetable for 20 February.
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