Pumpkin Patch posts $30m first-half loss on UK, US store closures

Pumpkin Patch 12-month NZX chart. Source: S&P CapitalIQ. Click to zoom

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BUSINESSDESK: Pumpkin Patch, the children’s clothing retailer, posted a first half loss on costs to close its US and UK stores.

The shares gained as it reported growth in sales. In mid-morning trading, the company [NZX:PPL] was up 2.33% to 88 cents.

The Auckland-based company turned to a loss of $30 million in the six months ended Jan.31, from a profit of $8 million a year earlier. Sales rose 17 percent to $161.1 million. The stock gained 2.3 percent to 88 cents and has surged 28 percent this year.

The retailer, which abandoned the US last year, was forced to quit its UK operation in January, appointing administrators to the unit and flagging restructuring costs as high as $32 million as its 36 stores failed to make an acceptable return.

“The company has explored possible opportunities with potential partners in the United Kingdom however nothing substantive has eventuated to date,” the company said. “Until long-term brand strategies are finalised for the market the company is increasing its online activity and utilising its extensive customer database to target existing retail customers who can no longer purchase direct.”

The cost of goods sold jumped 37 percent in the first half, outpacing the gain in sales. Profit from continuing operations before tax fell 33 percent to $8.4 million.

Sales in Australia rose 14 percent to $98.4 million on a strong Christmas season and improved stock management, though in a “challenging” retail market across the Tasman it was forced to spend more on promotions and absorb higher costs for cotton, resulting in a 13 percent drop in earning s before interest and tax to $13 million.

In New Zealand sales gained 7 percent to $28.8 million while EBIT fell 14 percent to $4 million.

No material improvement is expected in New Zealand in the second half and in Australia condition s will remain challenging “for some time.”

“The brand’s position in the Australian markets remains very strong and is well positioned for when retail conditions improve,” the company said. “When combined with the international opportunities being developed by the wholesale/franchise and online business unit the company is confident it will deliver significantly better financial results for shareholders going forward.”

Earlier this month the company announced plans to enter its 21st market signing an agreement with Mexico’s leading department store, Liverpool. It will sell Pumpkin Patch products in 24 of Liverpool’s 79 stores this year.

Separately, the company’s Middle East partner, Jawad Business Group, will sell its Charlie & Me products in 25 stand-alone stores across the region over the next 12 months.

The retailer won’t pay an interim dividend, though it will consider reinstating payments at year-end.

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