Daily ShareChat: Pumpkin Patch

By Jenny Ruth

Tuesday 28th December 2010

Pumpkin Patch is seeing a deterioration in the retail environment in Australia with demand slowing and sales to date down through the six months ending January amid increased discounting, says Guy Hallwright, an analyst at Forsyth Barr.

"New Zealand conditions also remain soft, continuing the trend seen through financial 2010. While late Christmas sales could change the story, at this stage it appears Pumpkin Patch's first half will be well down on last year's $14.3 million," Hallwright says.

He is forecasting first-half net profit will be about $11 million.

Pumpkin Patch gains the lion's share of its earnings from Australia where it has 119 stores and New Zealand is its next biggest market with 49 stores.

"For the full year, we have reduced our forecasts for both countries with Australia having the largest impact," Hallwright says. He has also reduced his estimate of wholesale earnings, given the slow recoveries in Britain, where the company has 39 stores, and the US, where it has 20 stores after closing 15 in 2009.

That means his forecast for the year ending July 2011 has fallen 18% from $27.4 million to $22.5 million compared with the $25.5 million it reported for the previous year. Hallwright has also cut his 2012 forecast from $32.4 million to $27.3 million, largely reflecting the slower Australian market.

Recommendation: Accumulate (because even though he cut his valuation by 27 cents to $2.23, the share price is much lower).

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