Kids clothing chain hits rough patch

The company has also had supply chain difficulties and delivery delays early in the season. Photo / File photo

The tough retail market has hit Pumpkin Patch which has reported a 43.5 per cent fall in half-year net profit to $8.1 million and warned trading conditions are expected to remain weak in the near term.

The children's clothing retailer's revenue for the six months to the end of January fell 10.4 per cent from a year earlier to $173.9 million, with the company saying a lacklustre trading environment resulted in lower sales in its key markets.

The financial impact of the Christchurch earthquake was not expected to be material with any losses being covered by comprehensive material damage and business interruption insurance.

An interim dividend of 3c per share is to be paid, down from 4.5c a share a year before.

Pumpkin Patch chief executive Maurice Prendergast said besides the difficult market, the company also had supply chain difficulties and delivery delays early in the season due to supplier factory closures and cost pressures within the supply chain.

Revenue was also hit by extreme bad weather in Australia and Britain, and disappointing post- Christmas sales.

Buffy Gill, a retail analyst for Goldman Sachs JB Were, said the result was in line with expectations and guidance. Gross margins had increased from 59.6 per cent in the previous corresponding period to 62.4 per cent, one of the highest results achieved in the company's history, and above its historic average of 59.0 per cent.

"We believe part of this has been driven by Pumpkin Patch's efforts to not fully participate in the heightened discounting occurring in the retail sector," she said.

Prendergast said despite the difficult conditions, Pumpkin Patch opened 17 stores in the half-year in this country, Australia, Britain and its newest retail market, Ireland.

However, with the opening of new stores in Britain and Ireland, sales in local currency grew 5 per cent but in New Zealand dollar terms sales were down 4 per cent due to the continued high exchange rates.

He said while short-term trading conditions were expected to remain challenging, the company would continue to implement its growth strategy.

The company will open another four standalone brand Charlie & Me by the end of July, in addition to seven stores it had already opened.

Pumpkin Patch shares closed down 6c at $1.31.