TRS and Broker Upgrades, page-7

Here’s my take on what might be driving the weaker share price.
The FY result clearly surprised the market and confirmed that discount retailing remains highly competitive and TRS are not going to have an easy ride growing profitability.
The soft start to FY2019 was a concern, because it is cycling off 3% negative comp store sales growth in the same period last year. Although -0.5% comps is not terrible, the market would have been expecting a positive number given the weak comp period. That said, the first 7 weeks is not a big driver of the results, with all the action is still to come. To meet its H1 guidance, TRS will need a strong new few months given this period was strong last year and it is expecting to beat it.
I would however note that mgt have been fairly good at forecasting performance in recent periods, although the market will likely wait until the AGM to get comfortable that H1 is on track.
Importantly also, H2 offers upside that the market is not factoring in at this point. H2 will be cycling a weak sales result. What is more interesting is that despite negative comp store sales, the H2 result saw EBITDA rise from $3m in 2017 to $8m in 2018. Accordingly, if they can achieve modest comp growth, and start to see the benefits of the HK sourcing office (which was a ~$1m cost in H22018), then it should drive a stronger full year result (and a potential return to positive H2 earnings).
However, the critical factor will be their ability to grow comp store sales. I also note that they appear to have appointed a new head of buying in July 2018 (Craig Tomlinson resigned after less than 12 months in the job), which remains a critical role and they mentioned they also want to appoint more merchandising personnel.
Overall, the AGM will be definitely one to watch – unless a private equity bid emerges in the meantime.