Discount retailer The Reject Shop says it has failed to get its product range right amid a decline in consumer spending.
The Reject Shop's net profit dropped 28 per cent to $12.3 million in the year to July 2, as the company had forecast in April.
Weak trading conditions, particularly in Western Australia and the Australian Capital Territory, contributed to a fall in like-for-like sales of 1.6 per cent.
Chief executive Ross Sudano said sales were particularly challenging in the second half of the year, largely due to declines in consumer spending and a poorly received merchandise strategy.
He said the group had over invested in new products at the expense of everyday value and branded bargains.
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"The impact was a perceived loss in value by some of our customers and reduced foot traffic," Mr Sudano said.
"This occurred at a time when the availability of discretionary income is challenged, and consumer confidence amongst our core customers continued to deteriorate."
Mr Sudano said The Reject Shop was returning to basics, with a focus on everyday items at good prices, and branded bargains.
However, the tough trading conditions experienced in the second half of 2016/17 have continued into the current financial year.
The company's comparable sales in the first seven weeks of 2017/18 were down three per cent on the same period a year ago.
"Nonetheless, we are confident that our continuing initiatives to improve sales, along with the positive effects expected from the promotional activities planned from September, will see the company return to positive comparable sales growth during the half, albeit at a low level," he said.
Shares in The Reject Shop dropped 26 cents, or 5.9 per cent, to $4.14.
THE REJECT SHOP HIT BY SALES SLUMP:
* Full year net profit down 27.8pct to $12.3m
* Total sales revenue down 0.7pct to $794m
* No final dividend, down from 19 cents
