My previous post on the ASX listed The Reject Shop (ASX: TRS) asked the question – Value Stock or Value Trap?
And today the company answered that question with their “PRE – AGM” trading update that NPAT was revised downwards between $10m – $11m. Additionally, comparable sales for first 15 weeks of FY19 are down 2.4%. A key indicator of the groups current and future profitability. As a result, the stock fell circa 38% for the trading day.
The lesson here, when investing, it pays to understand the qualitative factors that define the business and importantly its long-term competitive advantage that allows the company to earn excess profits over time and then reinvest those profits.
If your invested, you’re not alone, AustralianSuper has a 10% stake in company which makes me wonder. And on that note, stay tuned, I’m still interested to see how the story of The Reject Shop pans out.