Pumpkin Patch profit up 16 per cent

Children's clothing retailer Pumpkin Patch has reported a net profit after tax of $28.5 million for the year to July, up 15.9 per cent on the same period a year earlier.

Managing director Maurice Prendergast said sales growth was seen across all segments, with especially strong growth coming from the British retail market.

Sales by the group, which includes Urban Angel stores, were also up in Australia and New Zealand, despite the state of the retail environment in those countries.

Operating revenue rose 11.1 per cent to $311.5m, with 31 stores opening during the year -- 14 in Australia, seven in Britain, six in the United States, and four in New Zealand -- taking total store numbers to 168.

A final dividend of 4.25c per share, fully imputed, would be paid, taking the total dividend for the year to 8.50cps.

Mr Prendergast said that during the year the company faced historically high export foreign exchange rates, especially against the Australian and US dollars.

That had the effect of understating the true sales growth in overseas markets, he said.

Also during the year quotas were re-imposed on Chinese manufactured clothing imported into the US and the European Union from January 2006.

That reduced earnings before interest and tax (EBIT) by about $3.4m in the seven months since it was imposed.

The fickle nature of the Australian and New Zealand markets continued to provide uncertainty in the near term, Mr Prendergast said.

With increased interest rates and petrol prices denting customer confidence, the company anticipated a challenging 12 months in those markets.

But the Pumpkin Patch brand continued to dominate the childrenswear sector in Australasia, and the company would continue its policy of store growth and margin retention.

As store numbers increased in the developing British and US markets, strong sales growth was expected, but store opening costs would initially impact on the overall financial result.

The directors and management were confident the strategy would in the long term deliver the best result for shareholders.

The company would also continue to identify new wholesale markets for the coming years, predominantly in Asia and Europe.

In today's report Pumpkin Patch reported that sales from Australian retail stores rose 4.4 per cent to A$147.6m , or in NZ dollar terms sales were up 3.8 per cent to $163.5m.

Australian retail EBIT was up 12 per cent to $32.5m.

The 14 stores opened in 2006, including three outlet stores, took the total number of stores in Australia to 89, with 11 new stores planned in the coming year.

In New Zealand, retail sales grew 3.2 per cent to $59.7m, with EBIT growth of 11.8 per cent to $11.8m.

Total New Zealand stores had risen to 49 at the end of the year. One more store had opened since then, and the company expected to open another three Pumpkin Patch and one outlet store in this country in 2007.

In Britain turnover was up 51.2 per cent to £15.1m ($43.3m), with EBIT of $1.8m, compared to an EBIT loss in 2005 of $0.3m.

Excluding the EU quota costs on clothing imported from China, the EBIT result would have been $3m.

The company now had 23 stores in Britain, and planned to open at least eight more in 2007.

In the US, retail sales were US$3.8m, or $5.8m in NZ dollar terms. The EBIT loss of $0.4m included $1m of quota costs and the opening costs of six new stores, which took total store numbers to seven, all in California.

Since then four stores had been opened and the company planned to open at least 12 stores in 2007, including in Oregon and Washington states.

For the group, the increase in store numbers and work in progress for stores to open early in 2007 increased capital expenditure to $29.9m, from $13.6m a year earlier.

As stores were opened in the US and Britain with higher capital expenditure costs per store, it was anticipated debt levels would rise.

The company had $13m of net bank debt at July 2006, compared to net cash funds of $0.1m in 2005, while net assets were up 18 per cent to $96.9m.

Pumpkin Patch shares were unchanged at $3.98 by late-morning today.

- NZPA