New Zealand childrenswear retailer Pumpkin Patch has been hit by a drop in revenue, branding trading results from Australia as “disappointing”.
The speciality childrenswear company reported that total revenue for the six months to January 31, 2014 from the continuing business operations was $127.8 million. The figure represents a dip of 17 per cent on the same period last year.
Excluding reorganisation costs, underlying net earnings for the six months were $1.3 million (HY13: $6.5m).
Commenting on the result, chief executive Di Humphries said the results were impacted by the tough trading environment.
“The result reflects the challenging conditions in core markets, especially for apparel retailers, however we have many multi-channel and multi-brand opportunities available to us and we are making the changes needed to take advantage of them.” she said.
“I said when I took on this role that there was a lot of work to do to achieve the results expected from the company. Planning and implementing the changes needed in a company of this size and complexity does and will take time.
“However, work is already underway starting with changes made during the first half period to the head office support and executive structure to manage costs and build the capability and talent needed to drive the future direction of Pumpkin Patch,” she said.
The company divulged that for a large part of the summer season were materially impacted by major supply chain disruptions resulting from the failure of two core suppliers and major flooding in a key supply region in China.
Additionally apparel spending in the company’s core markets, Australia and New Zealand was weak in December with heavy discounting through the Christmas trading period.
Humphries said that the trading results from Australia were “disappointing” and considerable focus is being directed at confirming longer term plans for the Australian market.
“Although our strategic plans are becoming more internationally focused, improving the trading results and developing long term plans for the Australian store network remain priority areas. The Australian operation will directly benefit from the other changes we are making, in particular the branding and supply chain initiatives.”
The company has continued to expand multi-channel capability by adding more online flexibility and functionality to allow customers to shop the way they want to. “We continue to revamp our websites and customers are increasingly using the ‘click and collect’ service that is now available across all Australasian stores. The ‘e-counter’ service is up and running in New Zealand and will be rolled out across Australian stores in the coming months,” Humphries said.
Humphries said she is ‘generally pleased’ with how the international division has traded, despite the challenges many international partners faced in their local markets, high exchange rates and the impact of changes to the timing of deliveries to some wholesale partners.
“While there is work to be done to improve the performances in Ireland, excluding that market, earnings from international wholesale and online markets were up 24 per cent.”
“While heavy discounting continues in the Australian and New Zealand markets, Pumpkin Patch is seen as a premium brand internationally. The more I have seen of our international markets the more excited I am about the opportunities that exist for us offshore. For this reason, I am taking a very international view of our future,” Humphries said.
“Given some of the international relationships we are developing and the opportunities that are out there for us, I expect to see some decent earnings growth from our International business unit over the next few years,” she said.
While Australasian online sales were materially impacted by the supply disruptions during the season, Humphries expects to see considerable local and international earnings growth from online sales once a number of the strategic changes are made and bedded in. “The online division still generates earnings significantly higher than all of our New Zealand stores combined.”
“The 34 per cent increase in sales through international Pumpkin Patch websites shows that our long term online future is not just restricted to local markets. We will continue to take an international view of online opportunities given the ongoing sales growth through our sites, third party websites, and other multi-channel operators.”
Humphries also commented on recent organisational changes within the group, which have been made to secure a strong future.
Recent appointments to the company include Brenda Pennycuick as CEO, who came from Glassons, and brand and digital marketing specialist Kellie Nathan, who joined Pumpkin Patch as general manager of marketing after being heavily involved in the recent brand changes at Telecom.
“These organisational changes have generated around $3 million per annum overhead savings. While we are reinvesting some of this back into key areas, such as the design and marketing functions, the bulk of the savings will be retained.” Humphries said.
The company confirmed that a process to update Pumpkin Patch’s long term strategic plan, underpinned by detailed in-market consumer research, is also underway.
Chairperson Jane Freeman said the company expects to be in a position to share details of the strategy and consumer insights from the research mid-year 2014.
Freeman added that the Pumpkin Patch group has very strong brands in Australasia, a well advanced multi-channel presence in core markets, and a growing international online and wholesale operation across some key international markets.
“Our international database means we are strongly positioned for international growth in online shopping, but we need to ensure we have a very clear understanding of customers’ needs and how they expect us to connect with them. The strategic plan will establish the road map for this.”
Humphries said changes are also being made across the business will boost the company’s advantages to build further online sales growth. “We already have a significant international database of customers and are building our in-house design capability and much stricter management and control over our supply chain.”
Freeman said the changes being made across the business are necessary for the company to “take advantage of the many exciting local and international opportunities that exist for Pumpkin Patch and to improve the financial performances of all business units”.
“While the change process is challenging and the trading conditions we are facing are likely to remain tough for some time, we are not daunted by the hard work that is required.”