Pumpkin Patch has reported a full-year loss of $9.1 million, which it partly blames on impairments for poor performing stores and working capital risks, while the struggling children's clothing retailer has secured a lifeline from its bank.
The company was supposed to report its result last week, but on Friday morning deferred the result until today because of "certain risks which are expected to result in an unanticipated increase in provisioning against the carrying value of working capital".
The surprise announcement, which also flagged discussions with the firm's bank over its loan facilities, sparked a heavy sell-off in the firm's shares, which opened at 10.5c this morning.
Today, chairman Peter Schuyt said discussions with ANZ had been successfully concluded with facilities in place until the end of 2017.
The terms and conditions were "appropriate to to the circumstances of the company", he said.
Pumpkin Patch's full-year loss is an improvement on the $11.5 million loss reported a year earlier but significantly higher than Pumpkin Patch's previous market guidance for a "modest loss".
Normalised earnings before interest, tax, depreciation and amortisation fell to $11.7 million from $17 million a year earlier.
The company said the reduced year-on-year profitability mainly reflected currency pressure, which had impacted the translation of Australian sales and profits.
The loss of key wholesale customers in the Northern Hemisphere, as well lower online sales in Britain and the United States, where the company no longer has bricks-and-mortar stores, also contributed to the profit drop, Pumpkin Patch said.
The company said normalised ebitda for the year to July 2016 would be significantly lower than the 2015 result.
"The main contributing factors in the expected decrease are foreign currency headwinds and the flow-on impact of the tough trading conditions in the wholesale and online channels," Pumpkin Patch said.
Group revenue fell 1 per cent to $238.5 million compared with a 53 week trading period in the previous year.
"On a comparable 52 week basis, same-store sales were up 0.5 per cent in New Zealand and up 6.4 per cent in Australia (in Australian dollar terms)," the company said. "Online sales in Australia were also up, 7.5 per cent on last year in Australian dollar terms, but flat in New Zealand."
Sales outside Australasia fell 7.5 per cent on the previous year.
Schuyt said the company had made progress in improving stock efficiency and reducing debt.
Pumpkin Patch's net bank debt sat at $39.1 million on July 31 from $65 million 12 months earlier.
The company reported inventory of $41.2 million compared with $64.3 million at the end of the last financial year.
Pumpkin Patch said the inventory reduction reflected aged stock clearance and the timing of new stock shipments, which were estimated to be around $5 million.
Pumpkin Patch said operating cash inflows of $29.7 million had been generated in the year compared with operating cash outflow of $8 million in the previous year.
Newly appointed managing director Luke Bunt said his priorities since joining the board last October had been on refinancing the business meeting debt reduction objectives.
Since taking up his executive role last month, Bunt said he had focused on building the firm's executive capabilities and completed a review of Pumpkin Patch's positioning and performance.
He said market research performed as part of the review had confirmed that Pumpkin Patch retained strong brand loyalty among its customers.
"The review has underscored that Pumpkin Patch's focus must come back to its customers, the style of clothes they want to buy for their kids, the experience they want to enjoy in our stores and how they want to communicate and engage with us," Bunt said.
"To achieve this, investment will be required in product design, all our channels to market and on various customer communication mediums."
Schuyt confirmed that chief executive Di Humphries would step down next month.
The company did not declare a dividend.