Pumpkin Patch warns of profit drop

pumpkin-patchNew Zealand-based children’s wear retailer, Pumpkin Patch, has warned that its financial results for 2016 will be significantly below the previous year, citing adverse currency movements and further declines in its international wholesale business as the main reasons for the drop.

The company reported, in a statement to investors published on the NZX, normalised earnings before interest, tax, depreciation and amortisation would be between $1.5 million to $2 million compared to the $9.2 million in the same period in 2015.

The Auckland-based retailer will report further details, including additional provisioning for the closure of loss-making stores, when half-year results are published on March 21.

Pumpkin Patch had previously flagged it would be a tough period. In his address to shareholders in November last year, managing director Luke Bunt said earnings for full-year 2016 would be “significantly below” 2015.

Bunt told shareholders then that several key accounts in its international wholesale markets division had been lost, but that these areas remained an important opportunity for the company. In its note on Tuesday, Pumpkin Patch said a deal with ANZ to provide working capital requirements is in place until the end of December 2017.

The company had net debt of $39.6 million at the end of January, compared to the $52.7 million a year earlier. Pumpkin Patch’s new management team is working to turn around the struggling retailer.

Bunt has told investors the stores need more investment, the clothes need to become more “fashion forward” and the website needs to move away from being simply a clearance vehicle. He has also warned that the legacy costs of historical property exposures are putting it at a disadvantage.

Pumpkin Patch shares were unchanged at 10 cents, with shares down 17 per cent since the start of the year.

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