Pumpkin Patch posted a $26.7 million after-tax loss yesterday because of one-off almost $40 million restructuring costs, but made impressive inroads into containing debt and slashing stock levels to cap a stellar seven-month share price run.
In early July, the then indebted childrenswear retailer decided to close 15 of its 35 US stores as the United States financial crisis and recession wore on, placing its US trading subsidiary in chapter 11 bankruptcy, which allowed protected trading to continue during restructuring.
Craigs Investment Partner broker Peter McIntyre said the company's board had managed an "exceptionally good job" in being "hard nosed" during US restructuring, store closures and by renegotiating reduced rentals.
"They have reduced debt by a whopping 77% since last year; being down [$62.9 million] to $18.4 million. Crucial to retailers is their stock inventories, which they almost halved," Mr McIntyre said of Pumpkin's 47.5% slashing of inventory from $80 million to $42 million.
Without the almost $40 million restructuring cost, Pumpkin would have been in the black, but would have booked a 14% decline in after-tax profit to $14.7 million, for its full-year result to July, on a 4.5% revenue boost to $428.6 million.
Shares in Pumpkin Patch have leapt from 78c to $2.02c since February, with yesterday's result prompting a brief spike to $2.08 before retracing the gain.
Forsyth Barr broker Suzanne Kinnaird said while Pumpkin did not give any specific financial guidance, it believed it is through the worst of it, noting Pumpkin's debt facilities are in place until December 2011, giving investors reassurances on balance sheet strength and stability of funding.
New Zealand-based Pumpkin Patch, founded in 1991, was floated for $120 million in June 2004 and had since grown from 89 shops in New Zealand, Australia and Britain to 240 stores worldwide.
Pumpkin's chief executive Maurice Prendergast said the past 18 months had seen "unprecedented volatility" in all markets and the New Zealand dollar strength made it difficult to plan for long-term growth initiatives.
However, Australia and New Zealand were more stable and US restructuring was expected to improve earnings and cashflows in 2010; albeit with no immediate signs of economic recovery in the US, he said.
Pumpkin's dividend for the full year is the same as 2008 at 7.5c per share.
