Reject Shop share price dips 5% despite share buyback

The Reject Shop has just dropped its FY22 earnings report…

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Key points

  • The Reject Shop share price is having a rough day today
  • The ASX retail share has dropped more than 5% after it reported its FY22 numbers
  • The Reject Shop has also announced a new share buyback program

The Reject Shop Ltd (ASX: TRS) share price is tumbling on Tuesday after the ASX retailer reported its full-year earnings for FY2022. Reject Shop shares are currently trading at $4.30 each after opening at $4.20 this morning, down a nasty 4.66% from the $4.51 the company closed at yesterday.

The Reject Shop share price tanks on lacklustre results

  • Sales came in at $788.2 million, a rise of 1.2% over the prior corresponding period (pcp)
  • Statutory net profit after tax (NPAT) of $7.9 million, down 5% from the pcp
  • Normalised NPAT of $4.9 million, down 24.1% on pcp
  • Normalised earnings before interest and tax (EBIT) of $6.9 million, down 26.7% on pcp
  • Costs of doing business rose 1.3%
  • No dividend declared for FY22.

Although sales officially came in at $788.2 million, a rise of 1.2% over the prior corresponding period, this metric includes a 53rd week of the year. Excluding this extra week, sales would have been $774.6 million, a slip of 0.5% over the pcp. Comparable store sales were down 2.2% over the prior period.

Meanwhile, The Reject Shop has announced an on-market share buyback scheme of "up to $10 million". This is partly in lieu of a dividend for FY2022. The buyback will commence next month. It will represent the repurchase of "approximately 2.2 million shares or approximately 5.8% of issued capital". 

What else happened in FY2022?

Reject Shop management noted that the Omicron outbreak "adversely impacted store foot traffic in the lead up to the key Christmas trading period" of FY2022, with the company noting that sales across December and January were negatively affected. 

However, sales between March and June were reportedly far more positive following this period. 

What did management say?

Here's some of what Paul Bishop, the CEO of The Reject Shop, had to say on these results:

FY22 has been a challenging year for our customers, our team and our business…

The discount variety sector has an important role to play in helping Australians navigate this difficult economic time and, as Australia's largest discount variety retailer, I believe The Reject Shop can have a meaningful impact by offering our customers both branded consumables as well as exciting general merchandise at a low price.

I look forward to The Reject Shop delivering an improved and differentiated merchandise offer that strongly appeals to customers, which is expected to deliver comparable sales growth and create value for all shareholders.

What's next?

The Reject Shop has declined to provide any guidance for the 2023 financial year today. However, the company highlighted its plans to open 25 new stores this financial year, as well as close between five and ten underperforming stores.

In addition to these plans, management stated that its focus in FY2023 will be "on generating comparable store sales growth, which is expected to be supported by an improved product offering with more great deals on branded consumables as well as new and exciting general merchandise".

It is also focusing on "managing the impact of inflation on gross profit margin and operating costs".

Reject Shop share price snapshot

The Reject Shop shares have been struggling in recent months. With today's falls, the company remains down more than 40% year to date in 2022 so far. It's also down 25% over the past 12 months.

At the current Reject Shop share price, the company has a market capitalisation of $163.3 million.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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