Reject Shop profit slumps on flood costs

Reject Shop profit slumps on flood costs

The Reject Shop Limited (ASX:TRS) saw its net profit fall over 30% in FY11, due to the impact of the Queensland floods and weak consumer sentiment.

The January flooding had forced the company to close its Ipswich distribution centre, which services around half its sales. This left the Reject Shop unable to adequately supply its store base.

As a result of the closure, while sales grew 7.3% to $501.1 million from the opening of 23 new stores, comparative store sales fell 1.5% over the year. The company also felt the impact of the retail sector slowdown.

Managing director Chris Bryce called FY11 “the most challenging year in the company's history, ” noting that it spent most of the second half trying to recover from the impact of the closure.

Comparative store sales had been positive in the first half, before the floods.

The Queensland distribution centre is still operating at partial capacity, leaving a sales trend outlook for FY12 difficult to gauge, Bryce said.

But he added that all things considered, “achieving comparable store sales growth for the first half of FY12 will be challenging.”

The Reject Shop will also be facing increased costs in the financial year including increased insurance premiums and flood mitigation costs, Bryce said.

TRS shares fell 0.59% to $10.050 during Wednesday's trading.

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Tags financial resultsconsumer confidenceQueensland floodsASX:TRSChris BryceReject ShopRetai

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