The Queensland floods in January saw The Reject Shop’s Ipswich Distribution Centre “severely flooded” and affecting operations, which is now reflective in the company’s half year results for 2011.

The discount retail chain’s half year net profit after tax suffered a 16 per cent drop to $15.9 million, compared to the previous corresponding period.

Managing director Chirs Bryce said the closure of its Ipswich Distribution Centre has had a consequential adverse impact on sales and costs.

“Subsequent to the half year the Company’s trading has been severely disrupted by flooding across Australia, particularly in Queensland where the first few weeks of January saw numerous store closures and spasmodic distribution to stores,” he said.

“The Ipswich Distribution Centre is currently inoperable and although some operating capacity will likely become available in March, it will not be operating optimally until early next financial year. This will stretch our existing capabilities and disrupt service to stores during the half and will also require considerable planning prior to re-opening the facility.”

Bryce also highlighted that there were other factors that contributed to the company’s first half results.

“Despite a strong start to the half year, sales were disappointing during the peak seasonal period, impacted by a combination of factors including interest rate rises, price deflation and unseasonably cool weather,” he said.

“Gross margin and cost of doing business were also impacted by a combination of operational changes associated with the opening of the Ipswich Distribution Centre and lower sales in seasonal merchandise which also resulted in higher markdowns during the period.”

Sales for the period grew from $250.5 million to $275.9 million, an increase of 10 per cent, with comparable store sales growth of 1.1 per cent.

While the company said it will face “short term operation challenges” it will refine its supply chain and concentrate on its 17 newly opened stores.

“It will be a challenging time for the business in the short term, however we are moving closer towards business as usual with each passing week. As stated previously, January and February trading to date has been severely impacted by the recent floods, making an assessment of current trading performance challenging. We are therefore not in a position to provide any updated profit guidance for the full year at the present time,” Bryce said.