Daily ShareChat: Pumpkin Patch

By Jenny Ruth

Thursday 10th March 2011

Pumpkin Patch's 43.4% drop in first-half net profit to $8.1 million was in line with recent guidance and the outlook commentary, although uninspiring, was realistic, says Sarndra Urlich, an analyst at First NZ Capital.

"It is difficult to see where the catalyst for any meaningful growth is in Pumpkin Patch's key markets" Urlich says.

Key themes in the result included Australian sales declining 14.3% and by 13.8% in New Zealand dollar terms while Australian operating earnings fell 25.2%. "New Zealand was also disappointing with revenues down 12.4% and earnings deteriorating in the order of 23.8%," she says.

The wholesale division was affected by soft retail environments, particularly in the Middle East, combined with adverse currency movements and another negative was the rise in inventory from $71 million at July 31 to $92 million at January 31.

The results in Britain, were sales rose 4.4%, weren't awful but weren't material and neither were the US results, although they were better than Urlich had expected.

In light of the results, Urlich has downgraded her forecast net profit for the year ending July by 5.2% to $16.9 million and her 2012 forecast by 7% to $18.4 million. She has also cut her valuation of the stock to $1.28 from $1.40 and her 12-month target is now $1.23.

Rating: Underperform.

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