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Why shares in this ASX retailer have doubled in 6 weeks

The Reject Shop Ltd (ASX: TRS) share price has doubled in the space of just 6 weeks.

The Aussie retailer’s shares were trading as low as $2.00 per share back on 6 December 2019. However, they closed at $4.00 on Tuesday afternoon and are up 100% in the space of 6 weeks.

But what is driving the Reject Shop share price higher to start the year?

Why the Reject Shop share price is soaring in 2020

It’s been a wild few weeks for Reject Shop shareholders with all of their Christmases coming at once.

In the space of just 6 weeks, the group has gone from a near 52-week low to a near 52-week high. The Reject Shop now boasts a market capitalisation of $115.63 million and a dividend yield of 3.47% per annum.

There haven’t been too many price sensitive announcements from the group throughout this period. 

The Reject Shop share price started climbing just before the new CEO Andre Reich was announced on 9 December. Mr Reich is an experienced retailer with turnaround experience in a number of roles.

The new CEO has worked as Chief Operating Officer at Target Australia for Wesfarmers Ltd (ASX: WES) and General Manager of Merchandise & Marketing at Kmart Australia.

Since this announcement, it’s been relatively quiet despite a share price surge in the Christmas period.

The Reject Shop was slapped with a ‘please explain’ by the ASX for the sudden share price surge and responded on 7 January. The group could not explain the capital gains other than the CEO announcement and Grahger Retail Securities Pty Ltd buying up a significant stake in December.

Should you buy into Reject Shop?

While shareholders would be happy with the December and January turnaround, it may be just a flash in the pan.

The Reject Shop share price is still down nearly 30% since the start of 2018 and nearly 75% since its August 2016 peak.

There’s no doubt that the recent gains are encouraging for shareholders. However, I’d be hoping to see some longer-term gains under the new CEO before buying in.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers Limited. 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 Scott Phillips.

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