The company returned to positive comparative sales growth for the year, up 4 per cent, with a stronger second half as shoppers flocked to value chains seeking bargains.
The retailer sells a broad range of food, snacks, greeting cards, pet products, kitchenware and party supplies across its 380 stores in Australia.
Earnings before interest and tax rose 35.7 per cent to $20.8 million in the 52 weeks to July 2. Net profit jumped 30.5 per cent to $10.31 million. Statutory net profit was 63.4 per cent higher.
Investors were rewarded with a total dividend of 16¢, which includes a final dividend of 6.5¢ and a special dividend of 9.5¢. This will be paid on November 3.
‘Strong balance sheet’
Mr Cahn told investors the buyback was put in place after canvassing shareholders.
“We’ve got a strong balance sheet, our share price is moving around a lot, but we still think the company’s undervalued as well, so there is an opportunity to buy,” he said.
The buyback will start in mid-September. Based on the company’s closing share price of $5.70 on August 23, a buyback of $10 million represents the repurchase of 1.8 million shares, or 4.6 per cent of issued capital.
Mr Cahn is targeting gross profit margins this year of between 40 and 40.5 per cent, from 39.9 per cent in 2023 when margins were squeezed by selling lower-priced items and higher domestic supply chain costs.
“There are so many things that are influencing gross profit margin,” he said.
“There’ll be a benefit from [lower] shipping over the last 12 months, and we expect this to persist. The mix into consumables has brought margin down. Our sense is that stays the same over the next little while.
“Domestic supply chain costs are materially up, and you’ve heard others speak about this materially in the last 12 months and continue to escalate, so that’s going to be a headwind for margin,” he told investors.
The Reject Shop opened 15 new stores in fiscal 2023, predominantly in neighbourhood and strip locations in metro and country areas. It is targeting 15 new stores this year.
Mr Cahn has been leading the retailer after former CEO Phil Bishop abruptly left in February after just seven months in the job. Sources said he was not the “right culture fit” and possibly clashed with chairman Steven Fisher.
Street Talk reported in July that Canada’s Dollarama chain had approached The Reject Shop, whose largest shareholder is billionaire businessman Raphael Geminder’s Kin Group. UBS was assisting The Reject Shop with those discussions, which have ceased.
The Reject Shop is also facing a class action for allegedly shortchanging staff millions of dollars.
More to come