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Pumpkin Patch turns to 1H profit after year-earlier reorganisation costs; sales fall

Monday 18th March 2013

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Pumpkin patch, the children's clothing chain, returned to profit in the first half as costs to close underperforming stores in the US and UK a year earlier weren't repeated. Sales fell on tough trading conditions and inventory disruptions.

Profit was $4.7 million in the six months ended Jan. 31, from a loss of about $30 million a year earlier, the Auckland-based company said in a statement. Sales fell 5 percent to $153 million.

The retailer had to contend with "pretty subdued" trading in its largest markets of Australia and New Zealand and the weak performance was compounded by late delivery of the company's summer inventory at the start of the season, resulting in lost sales opportunities, the company said.

"Even though trading conditions across the rest of the period more closely tracked last year and we had a reasonable Christmas, we couldn't recoup the sales and earnings lost at the start of the season," chief executive Neil Cowie said.

Shares of Pumpkin Patch fell 1.5 percent to $1.30. The stock is rated a 'hold' based on a Reuters poll of four analysts, with a median price target of $1.55.

The brightest spot was in online sales, which climbed 28 percent to $19.3 million in the first half. It didn't provide a separate online earnings number.

In Australia, its biggest market with 132 stores, sales fell 5.7 percent to $102.8 million while earnings before interest and tax gained 1.3 percent to $16 million.

New Zealand sales fell 9.7 percent to $28 million and earnings rose 0.5 percent to $4.8 million. In the company's international division, sales rose 5.8 percent to $22.3 million and earnings fell 12.6 percent to $2.35 million.

Reorganisation costs were $2.6 million in the first half, down from $36.1 million a year earlier.

Pumpkin Patch isn't paying a first-half dividend and says it will review the policy at year-end.

The company didn't give a forecast for the full year. Its reorganisation will lead to improved earnings and lower working capital and net bank debt in FY14 and beyond," it said.

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