The Reject Shop in Melbourne. Picture: Tracey Nearmy/AAP
The Reject Shop in Melbourne. Picture: Tracey Nearmy/AAP

Reject Shop slams mortgage hikes

THE Reject Shop has cut its profit guidance by about 40 per cent after a sales slump it is linking to recent mortgage rate hikes.

The discount retailer says a decline in sales accelerated from 0.5 per cent to 3.9 per cent for the past eight weeks, forcing it to cut its first-half profit forecast from about $17.7 million to between $10 million and $11 million.

Managing director Ross Sudano called out the impact of recent out-of-cycle mortgage rate hikes, with three of the Big Four banks plus many other lenders announcing moves since the end of August.

"The continuing absence of real wage growth and increases in the cost of many basic expenses, including mortgage rates, ensures that competition for the discretionary spend of consumers remains high," Sudano said.

Mr Sudano acknowledged that shareholders, who have seen the stock slip in value from $8.36 in April to $4.47 before the start of trade on Wednesday, would be disappointed by the news.

He insisted the retailer was managing inventory well despite a challenging first 15 weeks of the financial year.

"We are entering our key selling period and have a strong seasonal program in place, with a compelling value offer for Christmas and many tactical activities in place to drive sales," Mr Sudano said.

"Christmas plans are built on the successes from last year and the early trade of the Christmas merchandise has been positive."