Revenue drops but profit up at Pumpkin Patch

An improvement in all its markets has seen Pumpkin Patch report a 50% lift in after tax net profit to $14.3 million.

The result – which was in line with expectations – came despite a 8.1% drop in revenue to $193.99 million, with the company still cautious about the future despite identifying growth opportunities in Australasia and the United Kingdom.

Pumpkin Patch used the downturn time to reduce its inventory by a third and slash net bank debt by 70% to $9.6 million.

The company now operates in 22 countries, with its Australian operation – where it has 114 stores – contributing more than half of all sales.

Same store sales across the Tasman were up 3%, with a 6% lift in NZD terms, while operating ebit for the six months ending January was up 4%.

The company is still working on the goal of opening 30-40 new Australian stores over the next three years, with another four due to be opened by the end of the financial year, including the first of the new smaller format stores.

Same store sales here in New Zealand stayed steady with a modest 1% increase, with improving margins leading to a 4% increase in first half ebit when the results temporary clearance stores that operated last year are excluded.

While it expects similar trading conditions in Australia for the rest of the year, the company is expecting New Zealand’s performance to slowly improve across the second half of the year, although a full recovery is not expected until 2011.

Sales in the United Kingdom were up by 3% in GBP terms, although the higher exchange rate saw a 12% reduction in NZD sales. Store level growth was generated in each of the six months except for January, with the company blaming the severe snow storms in that month for the drop.

Improved margins and supply chain processes in the UK saw the ebit loss for that region cut from $1.1 million to $0.2 million.

There was a similar cut in ebit loss across the Atlantic, with the 20 continuing stores in the US cutting that loss by $3 million to $0.8 million.

Pumpkin Patch said retail conditions remained volatile, although some small signs of improvement were seen in the latter part of the period. It confirmed that all the costs associated with the US cutback had been recognised in the 2009 results.

In its wholesale division, the company’s partners’ decision to lower orders in response to softer retail environments in their home markets saw a 14% drop in sales to $24.0m.

This saw ebit drop 13% to $6.8 million, although margins were at levels slightly higher than the same time last year.

The result has seen a 50% increase in the interim dividend to 4.50 cents per share, with a record date of April 8. 

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