The Reject Shop’s discount essentials are popular with families looking to save money and buy in bulk.

The company revealed in a trading update this week that it plans to open 15-20 new stores in 2025 after seeing record sales of $852 million last year and more recently a rebound in margins.

Reject Shop chief executive Clinton Cahn is preparing for a big Christmas trade as families look to stock up on decorations and groceries on tight budgets.

“Our initial Christmas stock has arrived and is set up in all stores, with customers responding positively to the range both at the register and on social media,” he said.

“The discount variety sector presents a significant opportunity for growth over the medium- to long-term,” he said.

The Reject Shop has 386 stores across Australia and has opened 67 over the past year, with 35 “mostly under-performing” stores closed since 2020.

Reasons for success

University of Technology Sydney Professor Sanjoy Paul said The Reject Shop is clearly benefitting from rising demand for cut-priced essentials and bulk purchases due to torrid cost of living pressures.

He said they’re experiencing the same halo effect as German Supermarket giant Aldi, which is ascendant across the market right now as consumers rage at the big supermarkets.

Coles and Woolworths are major players in most of the categories that The Reject Shop trades in, but have lost trust from shoppers who believe they can get cheaper deals at other retailers.

“Consumers are taking all of the opportunities they can to save money during the cost of living crisis,” Paul said.

“They’re turning to The Reject Shop for certain goods, like household or pantry items.”

As a discount chain, The Reject Shop is treated by investors as a ‘counter-cyclical’ business, which means they tend to experience growth when macro-economic conditions are weakest.

But the retailer is also in the middle of a turnaround plan after several years of tough results, with a new merchandising strategy that included a homewares range and a focus on seasonal events.

They’ve also been stocking select ranges of UK foods and drinks under a partnership with Tesco that has proven popular with consumers, helping to underpin a turnaround for the discount chain.

Profitability still a challenge

Paul said The Reject Shop does face challenges though, including how to make its resurgence with consumers and expansion into new stores profitable for its investors.

Last year the chain saw its after-tax net profit plunge 35.9 per cent to $4.7 million as inflation ate into its thin margins.

Though the company’s balance sheet is in a stronger position, with no debt drawn on its facilities with banks and almost $50 million in cash on hand.

“The Reject Shop continues to face near-term margin pressure from rising costs and higher shrinkage, which adversely impacted profitability during FY24 [financial year 2024],” chair Steven Fisher recently told investors.

There has been a more recent rebound in profit margins in early 2025, but Paul said the business will need to prioritise efficiencies in its supply chain.

“Their sales have increased, but their profits have decreased,” Paul said.

“They should be focusing on improving their supply chains – if you see the big supermarkets, they’re improving by implementing automation in their warehouses to save money long term.”