Pumpkin Patch sees unchanged profit in 2014 with risks to the downside; shares fall

Pumpkin Patch [NZX: PPL] , the children's clothing retailer, expects annual earnings to be in line with 2013, and says it faces more downside risk for the remainder of the year. The shares fell.

The retailer's profit before reorganisation costs will be about $8.5 million in the year ending July 31, 2014, largely unchanged from a year earlier, chairwoman Jane Freeman told shareholders at today's annual meeting in Auckland. The company will recognise a $1.5 million charge in the first half as it cuts staff, though will have lower costs in the future. The shares fell 2.2 percent to 90 cents today.

Sales in the first four months of the year were "materially impacted" by the Australian federal election, and New Zealand's trading conditions have remained challenging, she said. Pumpkin Patch has also suffered disruptions to its supply chain after two suppliers failed and major flooding in China left inventory short ahead of Christmas.

"After assessing various scenarios on all current known factors, on balance we believe there to be more downside risk than upside potential for earnings for the remainder of the year," Freeman said in notes published on the stock exchange. "We are clearly disappointed that the start of the year has fallen below expectations and that takes the shine off the progress that is being made across the business."

In September, the retailer announced a return to profitability in the 2013 period after booking charges on rejigging the business a year earlier.

Chief executive Di Humphries said the company will continue to review operational and central support costs, and she expects more savings to be found this year.

"Although we face challenging trading conditions across our major markets, we continue to make significant progress in repositioning ourselves so we can successfully execute our long-term growth strategies in local and international markets," Humphries said.

"While the change process is still on-going and the full benefits will not be seen in FY14, we are confident that the strategies being implemented will deliver materially better returns for shareholders in years to come," she said.

(BusinessDesk)