Pumpkin Patch is blaming adverse currency movements and further declines in its international wholesale business as it warns profit for the first half of the year will be just a fifth of what it achieved a year earlier.
In a statement to investors published to the NZX, the Auckland-based childrenswear retailer said normalised earnings before interest, tax, depreciation and amortisation would be between $1.5 million to $2 million when compared to $9.2 million in the same period in 2015. Further details, including additional provisioning for the closure of loss-making stores, will emerge when half-year results are published on March 21.
The company had previously flagged it would be a tough period. In his address to shareholders in November last year, managing director Luke Bunt said earnings for full-year 2016 would be "significantly below" 2015.
Bunt told shareholders then that several key accounts in its international wholesale markets division had been lost, but that these areas remained an important opportunity for the company.
In its note today, Pumpkin Patch said a deal with ANZ Bank to provide working capital requirements is in place until the end of December 2017. The company had net debt of $39.6 million at the end of January, compared to $52.7 million a year earlier.
Pumpkin Patch is trying to turn around under new management. Bunt has told investors the stores need more investment, the clothes need to become more 'fashion forward' and the website needs to move away from being simply a clearance vehicle. He has also warned that the legacy costs of historical property exposures are putting it at a disadvantage.
Pumpkin Patch shares were unchanged at 10 cents, with shares down 17 per cent since the start of the year.