Improved sales for The Reject Shop in the lead up to Christmas have failed to offset a tough period in prior months, leading to a 25 per cent drop in half year profit.
The discount retailer's sales in the six months to December were down 3.3 per cent from the same period a year earlier, when the effect of new stores and store closures is excluded.
Most of the damage was caused in July and August, which contributed to a 5.4 per cent drop in sales in the three months to September.
The pre-Christmas period was not as bad, but sales in the December quarter were still 1.7 per cent weaker than in the corresponding period in 2013.
That has The Reject Shop expecting a net profit of between $12.7 million and $13 million for first half of 2014/15, down 25 per cent from $16.9 million a year earlier.
"While the overall first half profit result is disappointing, reflecting the challenging trading conditions in the first quarter, it is pleasing to report that the trading performance improved in the second quarter and there are signs of continuing improvement in the early weeks of January," managing director Ross Sudano said.
OptionsXpress market analyst Ben Le Brun said high rents in suburban shopping malls and cautious consumers were hitting The Reject Shop, as well as the growing popularity of online retailing.
"Profit warnings have just been the norm probably over the past 12, 18 months for The Reject Shop unfortunately," he said.
"To my mind, they've aggressively expanded, and coming at a time when bricks and mortar retailers are finding it very, very tough to do business."
Its shares dropped two cents, or 0.3 per cent, to $5.99.
The Reject Shop is the third major retailer to issue a profit warning ahead of the half year earnings season in February.
Luxury fashion and accessories retailer Oroton expects its underlying earnings to fall by up to $3.5 million due partly to less discounting and costs from its new ventures with US clothing labels Brooks Brothers and Gap.
Losses at the fashion retailer Rivers are also set to weigh in earnings at Specialty Fashion Group, which also owns the Katies and Millers chains.
The Reject Shop will report its finalised half year results on February
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