KEY POINTS:
Pumpkin Patch yesterday downplayed difficult trading conditions which took the shine off its half-year result, preferring instead to emphasise a strategic shift that will see it accelerate store growth in the US and UK.
But sharemarket investors - who had already priced in high-growth expectations - appeared unimpressed and pushed the stock down 25c or 5.4 per cent to close at $4.40.
The children's clothing manufacturer delivered a net profit of $15.5 million for six months to December 31 - up 6.4 per cent on the same period a year earlier - but described conditions in Australia and New Zealand as difficult.
It also warned there was little prospect of improvement in either of those markets for the second half of the year.
Executive chairman Greg Muir described the period as challenging.
"But we got through it and produced a solid result," he said.
He noted group earnings before interest tax, depreciation and amortisation were up 15 per cent at $30.5 million and net profit would have come in at $17 million (a 12.6 per cent rise) were it not for tariffs and quotas imposed in the UK and US.
And the longer-term growth story remained very much on track, he said.
The company opened 20 stores during the first half and will open another 20 in the second half of the year.
In the next six months the Pumpkin Patch will open just two new stores in New Zealand and six in each Australia, the US and UK.
That would give it more than 200 stores worldwide.
The company was also weighing up expansion in several other foreign markets including India and countries in Europe, Muir said.
Chief executive Maurice Prendergast said Pumpkin Patch was entering a new phase and expected store growth to slow in Australasia.
"We've cemented our position in Australia," Prendergast said. "We can now take the foot off the accelerator and apply it elsewhere."
The US would likely be the focus of that acceleration because the cost of opening stores was lower than in the UK. The risks associated with opening new stores were also lower because leasing agreements were less severe in the US.
The company now earned 85 per cent of revenue from offshore markets, he said.
Analysts were surprised by the strong market reaction, noting that the result was only slightly down on expectations.
"Australia was slightly worse than expected and wholesale was slightly better," said Forsyth Barr's Guy Hallwright.
It was possible that the shares - which spiked to a record high of $4.95 last month - had got ahead of themselves, he said.
The US retail sales numbers were good and you had to assume that market would soon deliver on the bottom line, said an analyst who asked not to be named. "That is pretty exciting for the group."
But this was a high-growth company so expectations were very high, the analyst said.
