Pumpkin Patch first-half profit jumps 50%

Tuesday 2nd March 2010

Pumpkin Patch posted a 50% gain in first-half profit, after staunching losses in the US and UK, and trimming interest costs by slashing bank debt.

Net income was $14.3 million, or 8.5 cents a share in the six months ended Jan. 31, from $9.5 million, or 5.71 cents a year earlier, the company said in a statement today. Operating revenue fell 8% to $194 million.

The retailer was hit with the full force of the global economic slump in the previous year, spurring it to close unprofitable stores in the US and halt its expansion in the world’s biggest economy. In the latest six months, Pumpkin Patch held its US loss to $755,000 from a year earlier loss of $3.8 million, while its loss in the UK, where retailing has been hit hard by recession, dropped to $215,000 from $1.1 million. Earnings were little changed in its biggest markets, Australia and New Zealand.

“Although we still have some way to go before the markets fully recover, the company has a strong balance sheet and numerous growth opportunities that all bode well for the future,” said chief executive Maurice Prendergast.

Net bank debt tumbled 70% to $9.59 million and Pumpkin Patch reduce inventory by 34% to $75.5 million.

Shares of Pumpkin Patch climbed 3% to $2.06, the highest since January 20. Profit exceeded the $13.6 million estimate of Forsyth Barr analyst Guy Hallwright.

The company lifted its first-half dividend by 50% to 4.5 cents a share, which also beat estimates.

In Australia, the retailer’s biggest market, EBIT rose 2% to $19.9 million. The company plans to open four stores by the end of the financial year, bringing the total to 118.

In New Zealand, the market remained subdued, with EBIT growing 1% to $6.2 million on margin improvement.

The market is expected to “slowly improve” in the second half “with a fuller recovery not occurring until 2011.”

In the UK, sales were disrupted in January by snow storms, though Pumpkin Patch said trading conditions are expected to steadily improve through the remainder of the year and into 2011.

In the US, where the company took a year-earlier charge to close unprofitable stores, conditions are expected to “remain soft but improve slowly through into 2011.

In the company’s wholesale and direct business, orders fell in response to softer retail conditions, reducing EBIT by 13% to $6.8 million, while its EBIT margin improved slightly from 2009.

“Early indications are that these markets are slowly returning to more normal buying patterns” the company said.

Businesswire.co.nz

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