Pumpkin outlook patchy

Pumpkin Patch shares tumbled 8 per cent to $2.68 in early trade yesterday after Citigroup lowered its recommendation on the children's clothing retailer to a "sell" and cut its fiscal 2005 profit forecast by 3 per cent to $23.7 million.

Pumpkin Patch shares clawed back to $2.88 by the close, down 4c on the day.

Citigroup said its view was that the British arm would slip back into the red in the second-half as retail conditions weakened, earnings would be hurt by quota system changes, and a long, hot summer in New Zealand would trim second-half sales of autumn and winter clothes.

The broker also cut its fiscal 2006 earnings a share forecast by 9 per cent to $26.3 million following Pumpkin Patch's plan to expand into the United States, where the group expects it will take four to five years to break even.

"Operationally we continue to view the company's business model and management highly and view its long term prospects very favourably," Citigroup said in a research note.

"That said, the next 12-24 months will prove more challenging with retail conditions slowing and the company testing another growth opportunity."

- REUTERS