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Children's clothing retailer Pumpkin Patch expects difficult trading conditions to continue for the foreseeable future, with the full impact of the credit crisis yet to be seen.
Chief executive Maurice Prendergast told shareholders at the company's annual meeting in Auckland yesterday that he had not seen retail conditions as difficult, nor markets as volatile, in his 15 years at the helm.
And he said 2009 "looked every bit as challenging" as 2008.
Rising unemployment, falling customer confidence, lack of spending power and increased competition have had an impact.
"All our markets have been extremely difficult for the first quarter and we probably are yet to see the full impact of the credit crisis. This makes it very difficult to predict what the exact impact will be during 2009 and beyond."
But he was confident the company would emerge from the economic turmoil stronger.
He announced yesterday that the company was reducing staffing levels in all its 228 stores in New Zealand, Australia, the US and UK, on top of the 30 redundancies at its Auckland head office announced last month.
A hiring freeze was also in place.
Prendergast said the company was reducing all costs, specifically targeting areas not expected to yield returns in the next two years.
Capital expenditure had been scaled back from the $36 million spent in 2008 to about $16 million. A re-alignment of its foreign exchange portfolio had also enabled it to reduce bank debt by $30 million.
"We now expect bank debt to be between $30 to $40 million, a large reduction on the $81 million last year and well within our current bank facilities of over $110 million."
The company's inventory holdings - which drew significant shareholder concern - was also on a reduction programme.
Chief financial officer Matthew Washington said the company had estimated that it was carrying around $30 million more stock than was ideal, but was on track to being reduced to more comfortable levels within the next 18 to 24 months. It was expecting a $15 million reduction in this financial year, despite softer consumer spending.
The company was delaying further store openings in the US and UK - bar one in London at Westfield's new mall, White City. It still planned to open a further four stores each in Australia and New Zealand.
Pumpkin Patch founder and director Sally Synott said, "We're a company with people who can act. We're not paralysed by this recession, we're energised."
Shares in Pumpkin Patch closed down 6c at 94c yesterday.
