The Reject Shop's profits have soared as toiletries, pool toys, rocket blenders and $2 thongs boost the discount retailer's bottom line.
The retailer's net profit jumped 43 per cent to $18.3 million for the six months to December 27 with comparable store sales up 4.4 per cent compared to a 3.3 per cent fall a year ago.
This is a turnaround given it suffered profit declines and sluggish sales in the past two consecutive first halfs: a 24 per cent profit slide in 2015 and a 16 per cent drop in 2014.
The result has impressed investors who drove up the group's share price to a two-year high.
The improved results come about two years after The Reject Shop began shaking up its product range and store layout following five consecutive full year profit declines, three of which were linked to sluggish sales growth, in the wake of the devastating Queensland floods in 2011.
Managing director Ross Sudano says the strong same store sales growth showed the turnaround strategy was working.
"It gives us great confidence that we are on the right path," he told AAP.
"We brought some real interesting products into the market in the half including novelty kid storage tubs that did incredibly well.
"We also brought a range of floor rugs, which is not something we have traditionally sold well, and pool toys, beach towels and $2 thongs."
He said an improved variety of Halloween costumes and capitalising on the healthy food trend of rocket blenders also drove up sales.
"Customers responded really well, and continue to respond well, to the nutriBLAST and rocket blender."
He said most of the sales growth came from the first quarter, partly because the second quarter is more competitive given the Christmas trade.
Comparable sales rose 6.1 per cent in the first three months of the half and 3.2 per cent in the final quarter.
Growth has continued in the first six weeks of the second half with comparable sales up 3.2 per cent.
While no full year guidance was given, Mr Sudano says he expected sales and earnings to continue to improve in the second half.
CMC Markets chief market strategist Michael McCarthy described the profit growth as "stunning".
"It represents a turnaround given they were running against hard fixed costs in the previous half and now they have been able to lift sales significantly which has flown to their bottom line," he said.
"Not only is this good for The Reject Shop, it also tells us something about retail trends and it appears Australians are opening their wallets at the more value end of the buying chain."
Shares in the group rose $2.40, or about 25 per cent, to $12.50.
THE REJECT SHOP PROFIT JUMPS
* Half year net profit of $18.3m, up from $12.8m
* Revenue of $424.7m, up from $402.2m
* Fully franked interim dividend of 25 cents, up from 16.5 cents
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