The Reject Shop (TRS) - almost hit $15

[OneUp]

quote:Originally posted by David Hardman

Looks like "Grahger Capital Investments" likes TRS

Have recently become a SSH and continues to buy on market. (see announcements)

Their buying prolly explains the 60c rise over the last month

Who could blame them? They are not the only professionals to take a liking to TRS. Market Analysis put out a "buy" recommendation in early January (hence the spike in price at that time).

[tommy]

http://www.theaustralian.news.com.au...55E643,00.html

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Discounter sees how low it can go
Katherine Jimenez
June 08, 2005

PRICE competition among discount variety stores is about to intensify after struggling Miller's Retail yesterday signalled "aggressive sales and stock markdowns" in an effort to shift surplus stock.

The warning came as Miller's - owner of the Go-Lo, Crazy Clark's and Makro chains - said it would wear a one-off $55 million cost this year as it shifted inventory and met the expenses of closing 80 of its 1050 outlets around the country.

The retailer, which is two months into a strategic review that may lead to further consolidation in the sector, also revealed that its earnings could dip into the red by as much as $7 million in the 2004-05 year.

Miller's, which also owns Katies, said earnings before interest tax, depreciation and amortisation would be between $48 million and $53 million for the full year.

But its bottom line would suffer from the $55 million hit, with $25 million reflecting "immediate action" to rationalise company inventories with a program of "aggressive sales and stock markdowns".

Miller's chief Gary Perlstein declined to comment but it is likely the bulk of the inventory provision relates to its ailing discount variety business.

Miller's said it would exit or close about 80 underperforming stores in its 1050 store network at a cost of up to $30 million. Most are likely to be in discount variety.

The company described the provisions as "preliminary actions" to improve the business outlook. However, the aggressive price move is likely to trigger a price war in the already fiercely competitive discount variety market contested by Coles Myer's Kmart and Target, Woolworths' Big W, the New Zealand-based Warehouse Group and The Reject Shop.

One analyst said the move by Miller's "causes grief throughout the industry". "The biggest threat to an industry is the competitive actions of a player," the analyst said.

Millers said "the review has assessed inventory levels to be excessive and this has constrained buying practices and prevented the company from trading to its full potential".

Miller's also said yesterday that "due to the uncertain outlook and continued underperformance of the discount variety division" it would "write down the remaining carrying value of the division intangible assets to zero, a reduction of $31.1 million".

The discount variety business has been plagued with internal problems, compounded by a highly competitive environment over the past two years, mainly brought on by the Warehouse Group.

In April, Miller's new board announced a review of group operations but said the focus would be on the discount variety division.

Warehouse has flagged an interest in some of the stores, as has The Reject Shop. However, there is speculation Miller's may have also rekindled merger talks with Warehouse.

[tommy]

More news on Miller profits, TRS mentioned also... will TRS be interested in acquisition? Interesting times[:I]

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http://www.theaustralian.news.com.au...55E643,00.html


Retailers hang on despite industry downgrades
Katherine Jimenez
June 09, 2005

RETAIL stocks stood firm yesterday in the wake of profit downgrades from Oroton and Miller's Retail.

On Tuesday, Oroton - owner of the Oroton and Marcs labels - said higher overhead costs, restructuring expenses and a difficult retail market would push its earnings before interest, tax and amortisation 41 per cent below last year's $14.5 million result.

Its privatisation talks with private equity firm Catalyst ended on Monday after a disagreement on price.

It was originally believed to be more than $3 a share but came back to about $2.50 after the profit downgrade and cash-flow problems.

Just hours later, Miller's warned its full-year earnings would dip into the red, crunched by a $55 million provision relating to 80 store closures and stock markdowns. It will also write down the remaining carrying value of its troubled discount variety business - made up of Go-Lo and Crazy Clark's - to zero.

Investors marked down both stocks following their announcements but Oroton bore the brunt, collapsing 25 per cent to $1.95. Yesterday it gained 1c to $1.96, with Miller's sliding 6.5c to 80.5c.

The profit downgrades follow a string of warnings in the sector in recent months, and on Tuesday added to investor unease about the few retail companies that had not issued alerts.

Shares in Coles Myer and David Jones - which are holding firm on their forecasts - rose yesterday, with Coles up 12c to $9.60 and DJs 1c firmer at $1.86. Harvey Norman's shares fell 5c to $2.64. Holst FW analyst David Spry said: "I think generally there is a slowdown but those two particular companies (Oroton and Miller's) were going to probably report lower results regardless because of their internal issues."

Tolhurst Noall's Marcus Padley said Macquarie Bank had a "very high" volatility rating on Miller's. Macquarie said the retailer's balance sheet was stretched with poor visibility of earnings.

Miller's is two months into a review that could see it divest some of its discount variety businesses and start merger talks with New Zealand group Warehouse or Australia's The Reject Shop. In April, Reject Shop chief executive Barry Saunders said he could "not respond at this stage" to questions on whether it would be interested in participating in a merger with Miller's. "We'll see what happens with it all when they clarify what they are really talking about." He said it would be interested in buying some stores if they became available.

Warehouse has expressed interest in some of Miller's stores but could emerge with a bigger interest. The two held talks in the middle of last year but went their separate ways without any progress.

Oroton has begun a review of its balance sheet.

[OneUp]

Cheers Tommy, much appreciated - I don't get The Australian here. TRS has the cash reserves and balance sheet strength to fund the purchase of plenty of Miller's stores. Would be a nice fast track expansion if they could pull it out of the hat now, with the remodelled stores ready to trade for Xmas.

[robbo]

The Reject Shop (TRS)

Yep.

Do Agree with all of that ONe Up and Tommy........

Millers are now a totall distracted debt mired Basket Case...and The Warehouse Group are all but gone in Australia...

So the Strong Will Survive and Prosper...and that player will be The Reject Shop (TRS)...IMO..

One could actually argue, that in some regards....TRS....like Woolworths(WOW) on a bigger scale------is also a "defensive" play

Regards,

Robbo

[tommy]

Hi robbo, oneup and other REJECTORs,

I am hoping TRS will take advantage of ailing businesses and start taking over the unprofitably branches of rival companies in this gloomy retail market... TRS may indeed be a "defensive" play, but I'm hoping that the management expands their business "aggressively" by capitalizing on poorly performing competitors!

[robbo]

Heh Tommy,

Buffetty(Warren) Bird ...reckons that no amount of Good Mgt can Beat a Bad Business....

Better just to let em die....

And choose & Use their own--proprietary TRS "Superior and Proven Retail MODEL Criteria"--- with the success proven TRS Systems and TRS Mgt Skills to ----to at most; maybe carefully and prudently, and with Due Diligence (no Rush) --- cherry pick the "low hanging" Fruit... ... -- vis a vis the demographics/geographics, --- that may have opened in the Market due to the demise of Millers....

But to just barge in, "willy nilly" .... and take over the majority of Millers & Crazy Clarkes & Discount Dicks-- or whatever they were called..... and what not: errrr.......maybe I think not....

---- the TRS successful model....is a: "bit of knitting I hope that just Focus on ...and stick to" ......

and Stick strictly to what is profitable and works for TRS...and just have the discipline to stick with that...

wouldn't ya reckon Tommy ?? !

Kindest Regards,

Robbo

[OneUp]

It has occured to me that Millers may be so desperate to offload their discount stores they might pay TRS to take them off their hands. What do ya reckon?

[tommy]

Hi robbo and oneup,

Hope you are all enjoying the long weekend

As for Millers dumping their red-ink shops to TRS, I think anything is possible considering that the top management of TRS consist of people who know how to run retail business inside out!

They have been talking about expanding their network of branches for a while and I think this is a great opportunity to make good use of the cash they have.

I know robbo sounds disinterested in the idea of taking over bad business, but if TRS can kill off a competitor and turn their branches into profitable ones at the same time, surely they will at least consider that option? As the retail market becomes harsher, consolidation will naturally occur...

If they have an effective business model, they should be able to expand further through economies of scale, provided that they don't fall into the trap of diseconomies of scope by diversifying into areas where they're not particularly competitive... but in any case, the outlook for TRS appears to be better than other retailers at the moment, so I'm not complaining!

[tommy]

http://www.theage.com.au/news/Nation...347630793.html

Ouch! Retailers reel from $6bn pinch
By Annie Lawson
June 12, 2005


The twin effects of a cooler housing market and petrol price rises have cost retailers $6 billion in lost sales this year and are expected to inflict more damage.

The $200 billion retail industry is bracing for further softness but the impending income tax cuts could cushion it from any dramatic falls, according to one analyst. "I think the trend has been down, even before the (unseasonal) weather, since the start of the calendar year," said Anne Barnett, senior analyst at Aegis Equities.

"There was a bit of softening in the second half but it's been very soft into this calendar year on the back end of higher petrol prices and higher interest rates."

Although a warm autumn was largely to blame for sluggish winter clothing sales in May, the official interest rate rise in March - the first in 15 months - prompted home owners to rein in spending on such items as whitegoods, homewares, hardware, appliances and furniture.

Sales growth has virtually halved this year, forcing many shops, including Myer and David Jones, to bring forward their major sales. "I don't think retailers anticipated the sharpness of the fall . . . at the time, albeit it was coming from a high point," said FW Holst retail analyst David Spry. "The weather impact has come since then and confounded it slightly."

He said food and discount stores such as the Reject Shop and Kmart appeared relatively immune to the slowdown but others such as Harvey Norman had been affected.

"For good operators the current environment is not overly bad but inventory is something they need to carefully watch in terms of not carrying too much," he said.

"I think it certainly tests some retailers at the specialty end - we've seen Oroton and Miller's Retail struggling but they've got other problems as well, and we've seen JB Hi-Fi slowing from a high point. You'd have to say Harvey Norman is a bit vulnerable as they are exposed to all the sectors that are slowing."

A spokeswoman for Kmart said the chain was performing well despite the rise in interest rates.

Coles Myer refused to comment on the performance of its department stores but managing director John Fletcher recently used the phrase "cautious but not pessimistic" to describe the immediate outlook.

Mr Spry believes that retail sales will continue at current rates for the rest of the year.

"I don't think it's going to collapse and we're not at the stage yet where there's blood on the street," he said. "However, I can't see it bouncing back strongly - I think it's just going to go sideways for a while. There may be little blips up and little blips down but I don't think there'll be any dramatic swings."