Childrenswear retailer Pumpkin Patch could breach banking covenants if Christmas sales disappoint.
Pumpkin Patch chairman Peter Schuyt described trading conditions as "challenging" during the company's general annual meeting yesterday.
"The outcome of this trading period will materially affect our financial result and the outlook for the remainder of the year.
"Should trading not deliver to expectations over this period, or worsen over the first half of next year, then there is a risk that the company may breach banking covenants in the latter part of this financial year – noting that the seasonal trading results will become clearer over the next three to four weeks."
The Auckland-based company recently renegotiated the terms of its banking arrangements with ANZ New Zealand.
Under the new convenants, Pumpkin Patch must remain within 20 per cent of forecast earnings before interest, tax, depreciation and amortisation on a rolling 12 month basis.
Pumpkin Patch advised the bank it would not pay a dividend this financial year, and would need to seek permission from ANZ if that position changes.
The company reported a loss of $NZ10.2 million ($AU9.3 million) in the 12 months ended July 31 from a profit of $NZ5.1m a year earlier ($AU4.7 million).