KEY POINTS:
Pumpkin Patch yesterday issued a grim profit outlook with earnings flattened by the high dollar, interest rates and international trade barriers.
Executive chairman Greg Muir warned that the company - one of the star performers on the NZX since listing exactly three years ago - was now likely to deliver a net profit of between $26.5 million and $28 million for the year to July 2007.
A consensus of broker estimates compiled by Bloomberg indicates the market was expecting between $31 million and $32 million.
The share price was down as much as 25c (6 per cent) at one point before recovering to close 15c down at $3.80.
Pumpkin Patch shares have been trading at about 22 times its expected earnings for the current year - a high value for a retail stock, indicating expectations of strong growth in US, UK and Australian markets.
The downgrade was bad news for the investors because it would make it harder for the company to meet the future growth expectations that have been underpinning the share price, said one analyst. Market expectations for a 2008 net profit of about $36 million now looked extremely difficult to meet.
In the statement to the stock exchange Muir emphasised that international growth plans remained on track. An accelerated rollout of US stores would be detailed with the annual results due in September.
But a number of negative macro-economic factors were flattening its profit outlook, the company said.
These included the continued strength of the NZ dollar against the Australian, US and the UK currencies, quota regimes in the US and the UK adding costs to doing business in those markets, and the increases in the official cash rate.
Trading results to date from the Australasian markets had been very pleasing, Muir said.
He also emphasised that the company was only just entering the crucial June/July trading period which accounted for a significant portion of the season's retail and wholesale sales.
Pumpkin Patch has been an investors' favourite since listing at $1.25 three years ago. Its shares climbed to a high of $4.95 in January, but for the year to date they are down 17 per cent.
