Wellington, March 2 NZPA - Children's clothing retailer Pumpkin Patch has reaped the benefit of cutting its losses in America and is looking at expanding elsewhere in the world on the back of improved trading conditions.
The company today reported a 50 percent jump in half year profits despite a drop in operating revenue.
After tax profit had risen to $14.3 million for the six months to January, up from $9.5m in the same period last year.
Operating revenue slipped 8 percent to $194m from $211.1m.
"The 50 percent increase in earnings reflects the improving trading conditions across our markets and the benefits of the major initiatives we put in place over the last 18 months," said chief executive Maurice Prendergast.
Earnings before interest, taxes, depreciation, and amortization rose 6.3 percent to $27.7m, or 14.3 percent of operating revenue, up from 12.3 percent last year.
Bank debt was down 70 percent to $9.6m but with capital expenditure and expected working capital it was expected to be back up to $15m by the end of the financial year.
The company will pay an interim dividend of 4.5 cents per share, up from 3c last year. Shares in Pumpkin Patch were up 10c to $2.10 on the New Zealand stock exchange at lunch time today.
Revenue was hit by a higher exchange rate and the closure of loss making stores in the United States, Mr Prendergast said.
In September the company announced a net loss of $26.74 million after accounting for impairments and one-off costs from closing its stores in the US.
Pumpkin Patch's has now closed 15 of 35 stores there.
Mr Prendergast said the market in the US appeared to have bottomed out but the company was not expecting any significant improvement until the 2011 financial year.
Pumpkin Patch was founded in 1990 by Sally Synott, a former childrenswear buyer.
It now employs more than 3000 people and has 223 stores in four countries along with wholesale operations in 14 countries.
New Zealand accounts for just 16 percent of the company's turnover and is still looking at further global expansion.
Australia accounts for more than half of Pumpkin Patch's sales, and the company has identified locations for up to 40 new outlets there over the next few years. Australian trading conditions were steadily improving, Mr Prendergast said.
The United Kingdom operation now had 39 stores was a key gateway to Europe for future growth.
"Within the next month or so we will start selling product in some new and exciting markets such as China, Lebanon, Malta and Thailand. While these markets will start out small, they offer significant earnings growth.
"Although there remains some way to go before the markets fully recover the company has placed itself in a position to benefit from improving trading conditions."
The New Zealand market remained subdued although sales were up 1 percent.
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