Shares in Australia's largest discount variety retailer, The Reject Shop, are at a 12-year low after a profit warning triggered a string of negative analyst reports.
The Reject Shop's shares plunged nearly 50 per cent over two days, from around $8 to $4.16 a share, first on the company's disappointing trading update on Friday and then further on Monday following analysts downgrades.
The Reject Shop found some support on Tuesday, rising 30 cents to $4.46, but the stock remains at levels not seen since late 2005.
Investors dumped the stock on Monday after UBS, Morgan Stanley, Macquarie Group and Goldman Sachs all downgraded their outlook for The Reject Shop.
UBS slashed its 12-month share price target for The Reject Shop from $11.50 to $5.75 and warned investors that there could be continued store closures, particularly in major centres.
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It also downgraded its earnings before interest and tax margin of five per cent to three per cent.
"The magnitude of the earnings downgrade raises questions on the ability of management to turn around TRS's performance, and what the long-term sustainable store footprint is," the report said.
It also said the outlook remains uncertain given the discount variety market has been impacted by the resurgence of Kmart and the success of ALDI.
The Reject Shop last week flagged ongoing weak sales and said it expected a full-year profit of about $12.5 million compared to $17.1 million in 2015/16.
It also forecast a net operating loss of at least $5 million for the second half and warned that it may not be able to declare a final dividend in 2016/17.
