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Pumpkin Patch expects fall in earnings

pumpkin_patchPumpkin Patch, the children’s clothing retailer, expects next year’s earnings will be “significantly below” this year’s due to increasingly challenging international wholesale markets and adverse forecast currency impacts.

The ailing Auckland-based company affirmed expectations for normalised earnings before interest, tax, depreciation and amortisation of about $14 million in the year ending July 31, in line with earnings a year earlier.

It said that would lead to a “modest” after-tax loss.

However, it said normalised EBITDA for the 2016 financial year would be significantly below that forecast for 2015.

Analysts had forecast 2016 EBITDA would lift to $16.6m, from $14.4m in 2015, according to estimates compiled by Reuters.

Pumpkin Patch shares dropped 12 per cent to a record low NZ17 cents, and have slumped 55 per cent over the past year.

The retailer has discounted stock to maintain sales to compete with cheaper online rivals, shut unprofitable stores, and was tagged by its auditor last year over the prospect of breaching the terms of its banking covenants.

“Although the earnings expectation for next year is disappointing, the company remains confident in the value and potential of the Pumpkin Patch brand and is committed to embarking on the change process necessary to deliver the results that stakeholders are expecting of the company,” chairman Peter Schuyt said in a statement on Friday.

Pumpkin Patch named Luke Bunt as its new MD, replacing Di Humphries, who resigned in June.

Bunt, who became a director of the company last October, was previously CFO of discount retailer Warehouse Group.

Directors Rod Duke, whose Briscoe Group is in the middle of a hostile takeover for Kathmandu Holdings, will leave the retailer’s board, and Brent Impey will retire at the annual meeting in November, the company said.

Separately, the company said it is in “positive discussions” with its bank and expects to have revised terms and conditions for facilities in place on July 31.

In June, Pumpkin Patch abandoned plans to refinance or find a buyer after interested parties didn’t make a compelling enough offer.


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