New Zealand childrenswear retailer Pumpkin Patch has yielded to the tough trading conditions in Australia and downgraded its expected earnings for the full year 2013.
The brand operates approximately 128 stores in Australia and 52 stores in New Zealand, but decided to shut down its operations in the UK last year due to disappointing results.
Commenting on the Australian market, Pumpkin Patch said the last five weeks has seen a significant increase in the level of promotional activity in the Australian market with major retailers entering end of season sales much earlier and far more aggressively than normal.
The company said the tough market is expected to impact retail earnings for the remainder of the full fiscal year 2013, with 2013 full year earnings after tax but before reorganisation costs now expected to be between $7.5 million and $9.0 million.
In addition, as a result of wholesale partners altering delivery schedules to match their local promotion plans, a number of deliveries that have historically been made in July have been rescheduled to August and September.
The company said these changes are “only timing in nature however FY13 after tax earnings for the international business unit will be impacted by $0.6 million”.
Based on current trading conditions the company also anticipates bank debt at the end of July to be around $50 million.
However, despite the unseasonal winter weather and the very subdued retail conditions in Australia and New Zealand, Pumpkin Patch said trading results across the winter season had been tracking to expectations for most of the season.
The company added that it has been closely managing inventory across the winter season and will enter the new financial year well positioned for the launch of the new summer season’s product.
“The company has made good progress with the changes being made to the design and supply chain areas of the business. These initiatives will generate significant earnings benefits, improve working capital, and lower bank debt going forward. The first product developed under the new design process will be launched in Australia and New Zealand in August.”