Retailer ready for upturn after $26m loss

Pumpkin Patch believes the recent performance in its share price shows the market is confident the company is well poised to make the most of an economic recovery.

The children's clothing retailer has posted a $26.7 million net loss for the year to July because of heavy writedowns in its US operations. This compares with a $17 million net profit in 2008.

However its share price has risen steadily this year, from under a dollar to $2.02 yesterday.

Chief financial officer Matthew Washington said the company had dramatically changed its balance sheet in the past 12 months, addressing investors' main concerns.

"We've really got stuck into our debt, 77 per cent down on last year, inventory's down 30-odd per cent, so I think we've answered the two big questions people were asking."

A restructuring of its US division and closure of 15 stores out of 35 cost $39.9 million. It also suffered a $14.8 million earnings loss for the year in the division.

"Adverse trading conditions and the relatively young age of the majority of the stores made it impossible ... to make any headway in 2009," the company told the stock exchange.

However Washington said landlords of five of the US stores "came to the party" with favourable lease arrangements, so it was able to reduce the number of closures from the original 20 that were planned.

The US remained extremely volatile but the company now had a structure there that allowed it to sit and wait.

Pumpkin Patch's total operating revenue for the year was $412.6 million, up 3.2 per cent on the previous year.

Turnover in Australia was up 2.5 per cent, but in New Zealand sales were down 1.9 per cent.

Sales in Britain were similar to last year but a lot of discounting was necessary, leading to lower margins. It made a $5 million earnings loss in that division.