The Reject Shop expects to return to profit growth for the first time in four years as it pins its hope on everyday items and trendy products driving sales.
The discount retailer has increased its range of staples, including toiletries, confectionery and pet products, to turn around its struggling business.
It has also jumped on the hipster bandwagon, introducing products including artisan shampoos and conditioners and pillow cases made from bamboo fibres.
In a sign the new strategy is working, The Reject Shop’s same store sales rose 2.3 per cent in the six months to June 30, compared to a 3.3 per cent decline in the first half of the 2014/15 year.
Sales increased 4.7 per cent in the final three months of 2014/15, and growth continued in July.
Net profit fell slightly to $14.2 million, the third consecutive year of weaker earnings, but the company has forecast a return to growth in 2015/16.
Investors were pleased, with The Reject Shop shares gaining $1.04, or 16.35 per cent, to $7.40.
“Any same store sales growth is always going to be rewarded, particularly given the tough retail environment,” OptionsXpress market analyst Ben Le Brun said.
“The headline numbers appear to have beaten market expectations and the outlook is positive.”
Managing director Ross Sudano said stationery, craft accessories, food, pet products, toiletries and iPhone chargers sold strongly in the second half of the year.
“Our strategy is to use everyday items to build trust and bring customers in,” he said.
“Once they are in, we then want to show them other opportunities such as a big brand sold below market price, such as Nescafe Gold.”
Customers also liked to be surprised with new and trendy products they don’t expect to find at The Reject Shop, Mr Sudano said.
“Bamboo fibre is the evolving trend in textiles and we introduced bamboo fibre pillow covers much below specialty retailers’ prices and it flew out of our cupboards,” he said.
“Another one is Argan oil shampoo and conditioner, which grew out of the hairdressers and specialty retail market and is an evolving trend.”
Mr Sudano has been at the helm for about a year, and said changes in the company’s supply chain, management and marketing still had a long way to go.
REJECT SHOP SAYS NO MORE PROFIT FALLS
* Profit down 1.9pct to $14.2m
* Revenue up 6.4pct to $757m
* Fully franked final dividend up five cents to 13.5 cents