Pumpkin Patch returns to profit

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Pumpkin Patch returned to profit after a renewed focus on inventory margin, costs cutting and restructuring helped the listed children's wear retailer shrug off falling sales revenue.

The Auckland-based company reported net profit of $25.5 million in the 12 months ended July 31, from a loss of $26.7 million a year ago when it shut down 15 unprofitable stores in the US.

Revenue dropped 7.4 per cent to $382.2 million as retailers continue to struggle in what's become a tepid economic recovery.

"The increase in earnings is a very strong result considering the subdued retail environments we faced in 2010," chief executive Maurice Prendergast said in a statement.

Higher underlying earnings came from a "focus on the management of inventory, margins and overheads, so we are pleased with the result."

Earlier this month, the company was rated a 'buy' by Goldman Sachs JB Were as it was expected to hold its own ahead of increased competition in Australia.

The shares were unchanged at $1.95 on the NZX today, and have dropped 7.3 per cent this year.

Earnings before interest and tax from the Australian retail operations rose to 38.7 million, or 1 per cent as measured as a percentage of sales.
New Zealand retail EBIT rose 2 per cent to $11.3 million as sales dropped 6 per cent.

Pumpkin Patch said UK retail operations improved over the year, with a 5% increase in sales.

Still, the strong kiwi dollar meant they fell 11 per cent in New Zealand dollar terms, and it reported an underlying loss of $900,000, compared to a $5 million loss in the previous period.

Results from the company's 20 remaining US retail outlets improved, with an EBIT loss of $2.7 million for the year, up from a $9.3 million loss a year earlier.

The underlying earnings for its wholesale operation fell 17 per cent to $13.7 million.

Pumpkin Patch generates 85 per cent of its turnover offshore, and has a presence in 22 markets around the world.

The retailer declared a dividend of 5 cents per share, taking the total payments for the year to 9.5 cents.

That's an annual increase of 27 per cent which is fully imputed for New Zealand shareholders and franked 50 per cent for those in Australia.