The Reject Shop Ltd (ASX: TRS) share price has rocketed higher, climbing 24.7% to $12.59, after reporting a 43% increase in net profit.

Here are the highlights from the group’s first half of the 2016 financial year…

  • Sales up 5.6% to $424.7 million compared to the first half of the 2015 financial year (1H FY15)
  • Same-store sales were up 4.4%
  • Earnings before interest and tax (EBIT) up 38.8% to $26.4 million
  • Net profit up 43% to $18.3 million
  • Earnings per share of 63.5 cents
  • Fully franked dividend of 25 cents per share, up 51% over the 16.5 cents paid in 1H FY15
  • Operating cash flow of $26.5 million
  • Net cash position of $21.6 million

Pleasingly for shareholders, there were a ton of small improvements in reducing costs, getting customers more engaged, more visiting stores and spending more when they did.

Where to from here for Reject Shop?

The improvements look likely to continue with the Reject Shop focused on continuing to improve productivity and efficiency, lowering the cost of doing business and, in turn, allowing the company to reinvest more in driving top line sales growth. As one example, the company has reduced the set-up costs of new stores (~25% per new store).

Managing Director Ross Sudano said, “The momentum of the first half has continued into the first six weeks of the second half, with comparable store sales growth continuing at a rate consistent with that in the second quarter” (3.2%).

An additional 5 stores are expected to open in the second half of this financial year, although 5 will also be closed – with 3 of those due to redevelopments in the Centres where they are located.

Foolish takeaway

Written off by many investors when the share price plunged as low as $5.11 in June last year, Reject Shop appears well and truly back and set to improve on the results announced today. Even after the 24.7% rise today, the Reject Shop might be worthy of adding to your watchlist.

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Motley Fool writer/analyst Mike King owns shares in Reject Shop. You can follow Mike on Twitter @TMFKinga

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.