New Zealand childrenswear retailer Pumpkin Patch has confirmed its strategic company review could see changes to its retail network, among other extensive improvements.
The company, which announced its strategic review in March, said the focus of the review is on the operations and financial performance of the business.
This includes identifying and prioritising the strategic initiatives available to drive performance improvement above the currently unacceptable level.
The company said that it has identified several key focus areas for review – including information and business support systems and inventory holdings.
This is in addition to a store review which will see Pumpkin Patch continue with its ongoing assessment of its store footprint.
“As the company confirms its detailed strategic plans, it will undertake a store-by-store review to identify opportunities to best align the store network to meet customer demand profiles and drive improved financial performances.”
Pumpkin Patch also revealed it is also on the hunt for an executive to act in the role of a Project Management Officer (PMO) to help execute the review processes.
The company said the role has been created to manage the strategic change work program and will report directly to the CEO.
“The establishment of the PMO will allow management and business units to focus on their key day to day roles whilst having the PMO implement and monitor key change initiatives.”
The PMO will operate throughout the transition period in which new initiatives are implemented.
The strategic review has also confirmed Pumpkin Patch management’s view that the company’s systems infrastructure requires re-investment.
The review has identified a range of IT solutions which will significantly improve decision making, supply chain management and financial performance.
The company is considering opportunities to invest in planning, inventory, costing and other necessary systems over the next 24 months.
In the event that the company does invest in new systems, a review of the carrying value of existing IT assets will be undertaken prior to the current year end in order to assess the need for, and quantum of, any impairment or reduced expected life.
A number of strategic and process changes have also been identified to progressively reduce the level of inventory held by the company, to reduce debt, and to simplify inventory and pricing management.
Should an accelerated reduction in inventory be needed to regularise inventory holdings, an assessment of the holding value of inventory will be undertaken prior to the current year-end.
Looking ahead, the company said Australian trading conditions continue to be challenging, with a recent decline in consumer sentiment, an unfavourable federal budget and a warm autumn, leading to lower than expected sales in Australia and increased margin pressure.
However, Pumpkin Patch is likely to meet its earlier after tax profit guidance for the year ended 31 July 2014, of between $1 million and $3 million (before one off and reorganisation costs).
In conclusion, the Pumpkin Patch board said it believes that current financial performance is below an acceptable standard.
“The identification of key issues within the business will allow a renewed focus on areas of concern.
“The strategic change process is not short term in nature and considerable work is required across all parts of the business.”
The company added that it remains confident in the value and potential of the brands and is “committed to embarking on the change process needed to deliver the results that the stakeholders are expecting of the company”.