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Here’s why the Reject Shop share price rose 68% in December

Sebastian Bowen
Reject Shop

The Reject Shop Ltd (ASX: TRS) share price was an unexpected winner last month, capping off 2019 with a 68% share price rise. TRS shares started December at $2.03 but finished the year off at $3.41 – a monthly gain of 67.98%. Today, the Reject Shop share price is trending higher still, coming in at $3.49 at the time of writing.

However, December’s share price movements can be described as more of a ‘reprieve’ than a massive month of wealth creation for anyone who has held TRS shares for longer than a few months. Even at today’s prices, Reject Shop shares are at their lowest levels in 15 years. You could have picked up TRS shares for the same price as today back in 2005. And anyone who bought in back in August 2016 for nearly $15 would still be nursing massive losses.

Why did TRS shares have such a good month?

Sentiment seems to have turned for the Reject Shop after the company’s 10 December announcement to the ASX. This informed the market that Andre Reich would be taking the reigns as CEO, more than 6 months after the departure of his predecessor.

Mr Reich starts his new position on 13 January and brings plenty of retailing experience to the job, having served as Chief Operating Officer of the Wesfarmers Ltd (ASX: WES)-owned Target for the last 3 years. Prior to that, Mr Reich has worked for discount chain Kmart as well as famous Aussie retailer Myer Holdings Ltd (ASX: MYR).

The Reject Shop has been dealing with falling sales and shrinking earnings for many years now. During a horror FY19, Reject Shop earnings before interest, tax, depreciation and amortisation fell nearly 58% compared with FY18. As a result, dividend payments were suspended by the company’s management until profitability improves.

Clearly the market is hoping Mr Reich’s experience in the discount retail sector is enough to turn the company’s fortunes around. Investors may also be hoping that the recently wrapped-up festive season might also deliver a much-needed sales boost for the company.

Also, no doubt aiding the positive sentiment surrounding this company was another ASX announcement on 23 December that indicated some serious buying activity from institutional investors. The ASX filing shows that more than 1.6 million shares were purchased during the month, representing 5.64% of voting power for the company.

The post Here’s why the Reject Shop share price rose 68% in December appeared first on Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2020