Wednesday 19th March 2014
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Pumpkin Patch said first-half earnings plunged 98 percent as competition in Australia and New Zealand forced the children's clothing retailer to discount prices to stem a decline in sales, while contending with supply chain disruptions and a high kiwi dollar.
Net profit was $106,000 for the six months ended Jan. 31, sliding from $4.7 million in the same period a year earlier, the Auckland-based company said in a statement. Overall revenue tumbled 17 percent to $128 million, driven by a 19 percent decline in Australian sales, its largest market, and the impact of the high New Zealand dollar against the Australian dollar.
Chief executive Di Humphries was downbeat about the immediately outlook, saying trading would "remain challenging" as it spent more on promotions and contended with a strong currency. The company expected there to be a more "downside risk than upside potential for earnings" for the remainder of the year, she said, without being specific.
The shares dropped 13 percent to 59 cents, near the lowest in more than two years, and have fallen 51 percent over the past 12 months.
Last November the company told shareholders at their annual meeting that sales in the first four months of the year were "materially impacted" by the August Australian federal election, while New Zealand's trading conditions remained challenging with heavy discounting. Pumpkin Patch also suffered disruptions to its supply chain after two suppliers failed and major flooding in China left inventory short ahead of Christmas.
New Zealand sales fell 14 percent to $24.1 million and international sales declined 4 percent to $20.9 million, which the company said reflected soft conditions in Ireland.
Sales through its international websites rose 34 percent, it said without giving details. Online sales in Australasia were affected by the supply chain disruptions. Online sales are greater than the retailer garners from its New Zealand stores.
"While heavy discounting continues in the Australian and New Zealand markets, Pumpkin Patch is seen as premium brand internationally," Humphries said. "Given some of the international relationships we are developing and the opportunities that are out there for us, I expect to see some decent earnings growth from our international business unit over the next few years."
The company has gone through a period of reorganisation, reviewing operational and central support costs. Net profit before recognising those reorganisation costs, which includes losses from discontinued operations, was $1.3 million, down from $6.5 million in the previous comparable period.
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