KEY POINTS:
Pumpkin Patch is curbing expansion plans in its key US market as difficult economic conditions bite.
Tough retailing conditions have seen the children's clothing company take a big hit, with half-year net profit after tax down 23.7 per cent to $10.2 million under new international accounting standards. But operating revenue still increased 13.5 per cent to $205m, keeping in line with the company's compounding average growth rate since 2003.
Its New Zealand and Australian stores were the rays of sunshine, registering strong sales.
The 50 New Zealand stores posted an operating profit of $6.9 million, up 18 per cent, despite the lacklustre general retail environment. Operating profit for its Australian stores for the six months ending January 31 was $20.6 million, up 26.6 per cent.
UK store sales still grew by 21 per cent, despite general retail softness. Of 27 stores open longer than a year, 20 were making profits. The higher average exchange rate took a bite out of the results when translated into New Zealand dollars.
That is repeated in the US markets. Chief executive Maurice Prendergast said the credit crunch there was having an impact on all retail spending as well. Sales, however, were still up around 60 per cent, although that was still lower than anticipated.
Operating profits for its US stores have been significantly affected by the opening costs of 10 new stores, which take the company's US presence to 28.
Chief financial officer Matthew Washington said the company was adopting a more cautious approach to its expansion plans in the US, given the present economic environment.
Short-term earnings there were expected to remain subdued. It was going ahead with the opening of another six stores this year as planned, but will assess the retail environment carefully before planning the next stage.
"The general US environment, as everyone is saying, is soft and is going to continue that way for some time. This environment allows us to bed the stores down, to focus on making sure they're operating efficiently.
"The US market is such a massive market, any short term up or down doesn't affect the long term strategy for that market.
"Having a soft six months or 12 months really only delays the ultimate achievement of our strategy in the US by six months or 12 months."
Forsyth Barr analyst Guy Hallwright said the Australian and New Zealand markets performed better than expected, but that was countered by the UK and US performance.
"Nett-nett, it's not a bad result. I guess the difficult environment in the US and the UK is taking a bit more of a toll than I thought it would take but it doesn't necessarily change the long-run story in either of those places, which should still be very positive."
Shares tumbled 11c to $1.83.
The six-month results were prepared under the New Zealand International Finance Reporting Standards.
BOTTOM LINE
* Operating revenue $205m, up 13.5 per cent from $180.7m
* Operating profit (Ebit) $19.2m, down 8.7 per cent from $21m
* Net profit $10.2m, down 23.7 per cent from $13.4m
* Interim dividend 4cps, down from 4.5cps in 2007
results prepared under the NZIFRS accounting standard.
