Pumpkin Patch CEO resigns, shares drop

UPDATED: Shares in children's clothing retailer Pumpkin Patch have slumped more than 10% after the company announced a 50% fall in underlying profit and the resignation of chief executive Maurice Prendergast.

Pumpkin Patch said its underlying net profit after tax, excluding non-recurring reorganisation costs, was $12.6 million, down 50.5% from $25.5 million a year ago, but in line with guidance previously advised to the market.

The audited net result showed a loss of $1.8 million, reflected in part by a loss from discontinued operations of $9.45 million.

The company said Mr Prendergast would leave the company at the end of the year.

Neil Cowie, the company’s current chief operating officer, has been appointed chief executive designate.

The company said no further dividend would be paid as it looked to pay down debt.

The market didn't take the news kindly. Shares in Pumpkin Patch [NZX:PPL] slid 9c or 10.1% to 80c following the announcement.

Mr Prendergast said Pumpkin Patch faced a series of major challenges during the year. Difficult trading conditions in all markets, natural disasters, and political unrest in the Middle East, and a high NZD exchange rate affectd trading performances. In addition low inventory levels at the start of the year led to a poor six week trading period in August and September 2010.

Total group operating revenue for the year was $356.8m, down 7% (1H11 down 10%; 2H11 down 3%).

Soft trading conditions in all markets and the high NZD are expected to continue to create challenges in the 2012 year. However the company said it has started the new financial year with much better inventory. 

“While we are naturally disappointed with the overall group result you just have to look at the large scale store closures and restructuring plans announced by a number of the major international and Australasian apparel retailers as an indication of how tough it has been," Mr Prendergast said.

He highlighted the Pumpkin Patch online business as one of the successes for the year saying online sales were up significantly with good growth across local and international markets.

"We are currently investigating a number of initiatives to leverage off our existing online capabilities to grow existing markets and to develop new online opportunities," he said.

On Mr Prendergast’s resignation, chairwoman Jane Freeman said he would remain in office until the end of the year.

"Maurice has decided that the time is right for him to hand over the CEO role so he can focus on a number of other business and personal activities. While he is leaving his executive role we are very fortunate to have him staying on as a director and of course he will remain a significant shareholder,” she said.

Maurice Prendergast said while the decision was not easy, he was leaving the business in good hands.

“Even though the current trading environment is tough the company has some very exciting opportunities on the horizon and is well positioned to take advantage of those."