Pumpkin Patch half-year net profit down 43.5%

Tuesday 1st March 2011

Children's clothing company Pumpkin Patch reported a 43.5% fall in half year net profit to $8.1 million, as trading conditions continued to be tough.

Revenue for the six months to the end of January fell 10.4% from a year earlier to $173.9 illionm, with the company saying a lacklustre trading environment resulted in lower sales in its key Australian and New Zealand markets.

An interim dividend of 3c per share is to be paid, down from 4.5cps a year before.

Pumpkin Patch chief executive Maurice Prendergast said 2011 was always going to be tough, specially with the retail softness that had developed since early 2010.

The company also had supply chain difficulties and delivery delays early in the season due to supplier factory closures and cost pressures within the supply chain, Prendergast said.

Other challenges were extreme bad weather in Australia and Britain, and a disappointing sale period after Christmas.

"While all markets were characterised by heavy competitor discounting, we were able to maintain store level gross margins which will pay dividends when trading conditions improve," he said.

The level of the NZ dollar also affected earnings, particularly of the Wholesale division which primarily exported to the US.

Despite the difficult trading conditions, Pumpkin Patch opened 17 stores in the half year in this country, Australia, Britain and its newest retail market, Ireland.

While short-term trading conditions were expected to remain challenging, the company would continue to implement its growth strategy, Prendergast said.

New stand alone brand Charlie & Me now had seven stores, with another four to open by the end of July.

In Australia, sales for the half year fell 14% in NZ dollar terms on a strong first half performance a year earlier, while earnings before interest and tax (ebit) fell 25% to $14.9 million. So far this financial year, nine new stores had opened in Australia, taking the total to 128.

In this country sales were down 12%, while ebit fell 24% to $4.7 million. Three new stores were opened taking the total to 52.

For the Wholesale and Direct unit, sales were down 6% to $22.5 million, with ebit down 22% to $5.3 million.

In Britain and Ireland sales grew 5% when measured in sterling but fell 4% in NZ dollar terms, while ebit rose to $100,000 from a loss of $200,000 a year earlier. The addition of five stores took the total to 44.

In the US, sales rose 8% in US dollars, but was down 3% in NZ dollars, with an ebit loss of $500,000 compared to a loss of $800,000 a year earlier.

NZPA

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