The Reject Shop has swung to a full-year loss of $16.9 million following writedowns and disappointing sales, breaching its banking covenants in the process.
The troubled retailer, which parted ways with chief executive Ross Sudano in May, slipped from a profit of $16.6 million a year ago after booking post-tax impairments of $15.4 million.
The retail chain said the results meant it had not met its fixed charge cover covenant at June 2019, nor would it meet the covenant in September 2019.
It said it had received a waiver from its bank for both breaches and has support via the continuing provision of its working-capital facilities.
The loss means The Reject Shop will not pay a final dividend.
Shares in the company were down 10.14 per cent at $1.95 by 1045 AEST.
“We understand and accept shareholders will be extremely disappointed by the company’s performance,” chairman Bill Stevens said on Thursday.
Stripping out impairments, The Reject Shop recorded a loss of $1.5 million, in line with guidance announced in May.
Total sales for the 12 months to June 30 slipped by 0.8 per cent to $793.7 million, with comparable sales falling by 2.5 per cent on weak trading in Queensland, WA and the NT.
The company, which earlier this year rejected a $78 million takeover from packaging mogul Raphael Geminder, said sales had improved to 0.7 per cent on a comparable basis in the first seven weeks of FY20.
It offered no concrete guidance going forward but acting chief executive Dani Aquilina vowed the company would return to its roots as it attempts to turn the ship around.
“On close reflection we believe our divergence from our core strategy into higher priced fashion based categories has let us down in the prevailing retail environment,” acting chief executive Dani Aquilina said.
“We are focused on getting back to our roots and turning the business around, we are focusing on the categories our customers know us for and dialling up the essence of who we are, a discount variety store.”