Pumpkin Patch sees drop in 2016 earnings, citing challenging markets; shares drop

Pumpkin Patch [NZX: PPL], the ailing children's clothing retailer, expects earnings next year will be "significantly below" this year amid increasingly challenging international wholesale markets and adverse forecast currency impacts.

The Auckland-based company affirmed expectations for normalised earnings before interest, tax, depreciation and amortisation to be about $14 million in the year ending July 31, in line with earnings a year earlier, which it said would lead to a "modest" after-tax loss.

However, it said normalised ebitda for the 2016 financial year would be significantly below that forecast for 2015. Analysts had been forecasting a pickup in 2016 ebitda to $16.6 million, from $14.4 million in 2015, according to estimates compiled by Reuters.

Pumpkin Patch shares dropped 12% to a record low 17c, and have slumped 55% over the past year. The retailer has been forced to discount stock to maintain sales to compete with cheaper online rivals, shut unprofitable stores, and was tagged by its auditor last year over the prospect of breaching the terms of its banking covenants.

"Although the earnings expectation for next year is disappointing, the company remains confident in the value and potential of the Pumpkin Patch brand and is committed to embarking on the change process necessary to deliver the results that stakeholders are expecting of the company," chairman Peter Schuyt said in a statement.

Pumpkin Patch named Luke Bunt as its new managing director, replacing Di Humphries who resigned last month. Mr Bunt, who became a director of the company in October last year, was previously chief financial officer of discount retailer Warehouse Group [NZX: WHS].

"Luke has made a significant contribution and has demonstrated the necessary skills and experience to address the complex challenges faced by the business at the present time," Mr Schuyt said.

Directors Rod Duke, whose Briscoe Group [NZX: BGR] is in the middle of a hostile takeover for Kathmandu Holdings [NZX: KMD], will leave the retailer's board, and Brent Impey will retire at the annual meeting in November, the company said.

Separately, the company said it is in "positive discussions" with its bank over its existing banking facilities. It expects to have revised terms and conditions in place on July 31.

Last month, Pumpkin Patch abandoned plans to refinance or find a buyer after interested parties didn't make a compelling enough offer for the board.

(BusinessDesk)