Pumpkin Patch shares have plunged to an all time low after after the company posted a big drop in half-year sales and profit, but chief executive Di Humphries says she just needs "a bit of time to turn this baby around".
Shares are down almost 18 per cent, at 56c, after the Auckland-based children's clothing retailer announced a 98 per cent drop in earnings as competition in Australia and New Zealand meant steep discounting was required to stem a decline in sales.
Supply chain disruptions and a high kiwi dollar also contributed to the profit drop.
Humphries, who took the helm at Pumpkin Patch last year, said she was "very disappointed" with the result, but the retailer was a "large and complex business".
"Just give me a bit of time to turn this baby around," she said. "There is major potential and we've done a huge amount of work.
The most disappointing thing about this result is the fact that we've actually done a massive amount of work in repositioning this business to leverage it forward."
Humphries said the turnaround process was expected to continue until at least February next year.
Net profit was $106,000 for the six months ended January 31, down from $4.7 million in the same period a year earlier, the company said.
See today's news release here:
Overall revenue tumbled 17 per cent to $128 million, driven by a 19 per cent decline in Australian sales, its largest market, and the impact of the high New Zealand dollar against the Australian dollar.
Humphries was downbeat about the immediately outlook, saying trading would "remain challenging" as it spent more on promotions and contended with a strong currency. The company expected there to be a more "downside risk than upside potential for earnings" for the remainder of the year, she said.
"There is major potential and we've done a huge amount of work. The most disappointing thing about this result is the fact that we've actually done a massive amount of work in repositioning this business to leverage it forward."
Last November the company told shareholders at their annual meeting that sales in the first four months of the year were "materially impacted" by the August Australian federal election, while New Zealand's trading conditions remained challenging with heavy discounting.
Pumpkin Patch also suffered disruptions to its supply chain after two suppliers failed and major flooding in China left inventory short ahead of Christmas.
New Zealand sales fell 14 per cent to $24.1 million and international sales declined 4 per cent to $20.9 million, which the company said reflected soft conditions in Ireland.
Sales through its international websites rose 34 per cent.
Online sales in Australasia were affected by the supply chain disruptions.
"While heavy discounting continues in the Australian and New Zealand markets, Pumpkin Patch is seen as premium brand internationally," Humphries said. "Given some of the international relationships we are developing and the opportunities that are out there for us, I expect to see some decent earnings growth from our international business unit over the next few years."
The company has gone through a period of reorganisation, reviewing operational and central support costs.
Net profit before recognising those reorganisation costs, which includes losses from discontinued operations, was $1.3 million, down from $6.5 million in the previous comparable period.
- with BusinessDesk