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Pumpkin Patch shares sink to record-low as 1H earnings plunge 98%

Shares in Pumpkin Patch [NZX: PPL] plunged to a record-low after the children's clothing chain reported a slump in first-half earnings and anticipates a strong currency may lean on profit for the rest of the year.

The stock sank 19 percent to 55 cents, valuing the retailer at $115 million, after the company reported a 98 percent drop in first-half profit to $106,000 in the six months ended Jan. 31. Revenue declined 17 percent to $128 million as two failed suppliers and major flooding in China disrupted its supply chain, leaving inventory short ahead of the Christmas trading period.

"The results on the table are terrible for our shareholders. There is massive potential, it just needs to be unleashed," chief executive Di Humphries told an analyst briefing. "The most disappointing thing about these results is that we had done so much work and there is still more to do, but we are repositioning this business."

Chief financial officer Matthew Washington said the impact of New Zealand's strong currency against its Australian counterpart may have a bigger impact on earnings as the financial year unfolds, and risks in the second half are skewed to the downside.

Sales in Australia, the company's biggest market, tumbled 19 percent in the half. The kiwi dollar was recently at 94.37 Australian cents, and has gained 12 percent since July last year.

"There is more risk on the downside than the upside in the short term," Washington said. "That's purely because of what we're just seeing, or not seeing, coming out of Australia in particular, and also with that exchange rate there are a few headwinds in the latter part of the second half. "

Pumpkin Patch has gone through a period of reorganisation, reviewing operational and central support costs. Profit before those reorganisation costs, which includes losses from discontinued operations, was $1.3 million in the half, down from $6.5 million in the previous comparable period.

New Zealand sales fell 14 percent to $24.1 million and international sales declined 4 percent to $20.9 million.

Sales through its international websites rose 34 percent, it said without giving details. Online sales in Australasia were affected by the supply chain disruptions.

Humphries said consumers are still interested in the company, and that Pumpkin Patch is seeking to boost profitability by latching on to areas of growth in the retail sector.

"We can see where the strengths in online are and then really shifting the business model as to where we need it to go to go forward," Humphries said.

The company anticipates announcing new partnerships in the coming months, without providing any detail.


More by Suze Metherell

Comments and questions

It's time for Di Humphries to stop being just a 'pretty face' and do something to lift Pumpkin Patch's competitiveness.

It takes a long time to turn around a company that has lost it's way.

Unfortunately it's share price has a long way to fall (even after today) for it to get anywhere near its intrinsic value.

With pumpkin patches significant retail store footprint - they simply need to put something in the stores people want to buy! Invest in complimentary brands. Go to the market and raise funds to acquire brands that people want to buy. PP needs to evolve into a childrens brands retailer rather than a clothing retailer. Every year they fail to diversify and do this, is another wasted opportunity and nail in your coffin. Make your mark Di Humpries and drag them into the future rather than focusing on tired old strategies that will deliver the same dismal results. Get something unique in your stores!

Raise funds? Who would want to buy into PPL?
It been awful, and for sometime now. I'd question whether any investors would want to pour any money into this.

The only way out of a hole as APN news and media showed when they slumped after the CEO was ousted is to severely cut costs, reorganise and focus on the divisions that have potential.

Unfortunately, the only way forward is for PPL to focus on "Internet retailing" but they clearly haven't managed to penetrate that side of the market and they're frontline sales, are bleeding thick and fast.

Fair point. Who would buy now? I guess it comes down to how well they can articulate a strategic vision to get them out of this mess and how well the CEO can sell this. I guess that's why she gets the big bucks...

Solutions, you say PP "needs to evolve into a childrens brands retailer rather than a clothing retailer" and should "acquire brands".
Then you say it should "get something unique in [its] stores!".
Well, it has something unique in its stores -- Pumpkin Patch. If it became a "brands retailer" instead it would have nothing unique.
Your thinking is very muddled. Never mind, you put the boot in and probably thought you sounded knowledgeable.

How insightful of you Alex. Your ideas are wonderful if not a little absent. There is nothing unique about kids clothes particularly when it has failed as the current pumpkin patch brand is failing. All products have a lifecyle. Just look at other successful clothing retailers who first started retailing clothes such as Just Group who are mostly known for just jeans stores. Instead of being a one trick pony in a crowded market, they have diversified into other brands such as smiggle. Smiggle is now a cash cow, low retail footprint per store when compared to traditional retail, high margins and high turnover. PP has huge overheads in each store. Can't just walk away from leases to reduce costs. Put another kids product in 33% of each store, diversify from just kids clothing. Diversification is a strategic necessity. Or they can do what you suggest Alex....nothing. Seems to have worked so well to date.

Bring back Muir all is forgiven

PPL stuff is boring. It looks the same now as it did 10 years ago. Can someone please explain to me how, in an area like fashion, that is going to work?

My experiences of Pumpkin Patch in the last 6 months hasn't been great. The clothes appear to be of far lesser quality that they used to be. The stores are muddled. The website is the worst I have seen. The search functions are difficult to use but almost impossible on a phone or tablet device with tiny tick boxes! The names of the categories of clothes often show up incomplete for example
knit jacket
knit jackets sweats
knit long s
knit long sleeved to
knit short
knit short sleeve to

The pages of the catalogue don't show up on a mobile device.

Also you can't see how clothes work together as they are mostly displayed as separates.

Please fix the website and improve quality so people can actually want to use it and continue to buy clothes that would be a good start.