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Pumpkin Patch returns to profit

Wednesday 22nd September 2010

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Pumpkin Patch returned to profit after a renewed focus on inventory margin, costs cutting and restructuring helped the listed children’s wear retailer shrug off falling sales revenue.

The Auckland-based company reported net profit of $25.5 million in the 12 months ended July 31, from a loss of $26.7 million a year ago when it shut down 15 unprofitable stores in the US Revenue dropped 7.4% to $382.2 million as retailers continue to struggle in what’s become a tepid economic recovery.

“The increase in earnings is a very strong result considering the subdued retail environments we faced in 2010,” chief executive Maurice Prendergast said in a statement.

Higher underlying earnings came from a “focus on the management of inventory, margins and overheads, so we are pleased with the result”.

Earlier this month, the company was rated a ‘buy’ by Goldman Sachs JB Were as it was expected to hold its own ahead of increased competition in Australia. The shares were unchanged at $1.95 on the NZX today, and have dropped 7.3% this year.

Earnings before interest and tax from the Australian retail operations rose to 38.7 million, or 1% as measured as a percentage of sales. New Zealand retail EBIT rose 2% to $11.3 million as sales dropped 6%.

Pumpkin Patch said UK retail operations improved over the year, with a 5% increase in sales. Still, the strong kiwi dollar meant they fell 11% in New Zealand dollar terms, and it reported an underlying loss of $900,000, compared to a $5 million loss in the previous period.

Results from the company’s 20 remaining US retail outlets improved, with an EBIT loss of $2.7 million for the year, up from a $9.3 million loss a year earlier.

The underlying earnings for its wholesale operation fell 17% to $13.7 million.

Pumpkin Patch generates 85% of its turnover offshore, and has a presence in 22 markets around the world.

The retailer declared a dividend of 5 cents per share, taking the total payments for the year to 9.5 cents. That’s an annual increase of 27% which is fully imputed for New Zealand shareholders and franked 50% for those in Australia.

Businesswire.co.nz



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