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Pumpkin Patch pays debt, cuts costs in 'tough' retail market

Wednesday 5th November 2008

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Pumpkin Patch, the children's clothing chain with stores in New Zealand, Australia, the UK and US, said it has repaid debt and cut costs in the face of "tough" market conditions.

Bank debt will be between $30 million and $40 million by July 2009, down from the company's previous estimate of $60 million to $70 million, chief executive Maurice Prendergast said. The company took advantage of gains from currency hedging, trimmed inventories and cuts costs of wages and head office overheads, he said.

"We expect retail conditions across all markets to remain tough for some time so we are taking these steps to strengthen the platform from which we operate," Prendergast said. Cutting overheads will "ensure our cost base better matches the environment in which we expect to operate over the next year."

Shares of Pumpkin Patch rose 5% to $1.05 and have tumbled more than 60% this year, marking one of the worst performances on the NZX 50 Index. Prendergast declined to give a profit forecast for 2009, saying earnings are dependent on "the all-important Christmas trading period."

Pumpkin Patch joins other retailers in predicting tougher times ahead in a domestic economy that's in recession and an Australian market where growth is slowing. Yesterday, clothing chain Hallenstein Glasson Holdings said first-half profit will slide as weakening demand in New Zealand erodes sales.

Pumpkin Patch's profit dropped 28% last year as consumer spending waned in the UK and US Earnings fell to $17.1 million in the year ended July 31.

The company realised about $30 million of mark-to-market gains from its foreign exchange cover to reduce debt.

By Jonathan Underhill

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