The S&P/ASX 200 (INDEXASX: XJO) has gotten off to a strong start today, but not as strong as shares in The Reject Shop Ltd (ASX: TRS) which have jumped 40 cents or 4.7% to be trading at $8.99 per share.
The rally came after the group provided a pre-AGM trading update. The announcement highlighted a significant improvement in business conditions compared to the beginning of the financial year. While negative consumer sentiment and an unseasonably warm winter were cited as reasons for a sharp decline in comparable store sales in July and August, the company reported that sales have improved considerably over the last five weeks. Although comparable store sales were still down 5.4%, total sales for the first quarter were up 2.7% compared to the prior period.
Although it has been a tough period for the retailer – and indeed for its shareholders, with the shares having fallen roughly 50% over the last 12 months – The Reject Shop still looks to be one of the most promising investments in the sector.
Due to the nature of its products (being low margin goods), it is relatively protected from the rapidly expanding online retail sector. As the company continues to grow its store count, now may be an excellent time to stock up for the long haul.
