Pumpkin Patch targets IT system, stores, inventory in strategic review

Tuesday 24th June 2014

Pumpkin Patch, which slashed its full-year earnings forecast by as much as 88 percent last month, is mulling its "store footprint", stock levels, and an information technology system upgrade as it pushes on with a strategic review to drive performance above the "currently unacceptable level".

The Auckland-based children's wear retailer announced the strategic review in March to try to revive its performance and has shed 52 percent of its market value this year to be the third-worst performance in the NZX’s All Ordinaries Index. Pumpkin Patch is considering an investment in a new IT system over the coming 24 months to make its distribution and supply chain management more efficient, while it is also assessing its store footprint, including a store-by-store review. The retailer has already identified a number of ways to reduce inventory held by the company, and plans to appoint a project management officer to report to chief executive, Di Humphries, on the review and proposed changes.

"The board believes that current financial performance is below an acceptable standard," the retailer said in a statement. "The identification of key issues within the business will allow a renewed focus on areas of concern."

Pumpkin Patch wants to refresh its products and branding, gain greater leverage out of its existing customer database, implement new supply chains and distribution arrangements and improving the product value equation, it said.

Children’s clothing stores are struggling along with the broader rag trade in the face of online competition, discounting and soft demand in Australia and New Zealand, which forced rival retailer JK Kids to close last year, while clothing chain Postie Plus this month appointed administrators after lenders withdrew support.

Last month Pumpkin Patch cut its guidance for after-tax earnings before reorganisation costs to a range of $1 million and $3 million for the year ending July 31, having earlier said earnings would be little changed from last year’s $8.5 million.

The company last paid a dividend in the first half of its 2011 financial year. Pumpkin Patch shares rose 2.3 percent to 44 cents.

BusinessDesk.co.nz

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