Pumpkin Patch lowers profit forecast as it considers future of UK stores
The restructure will include the closure of all 20 of its US stores and the write-off of unprofitable stores in the UK.
Pumpkin Patch said it would be negotiating with UK landlords to seek rent reductions as leases expire and close stores where agreement cannot be reached. There are 41 Pumpkin Patch stores in the UK many of which are trading at an "acceptable level" said the retailer.
An EBIT charge of $9 million to $11 million will be taken in 2011 to cover the costs of the changes and the UK impairments. As a result, Pumpkin Patch said full year profit was expected to be at $12 million to $14 million, down from last year's $25.5 million and below the forecast given in January of $16 million to $18 million.
The benefit of the changes is not expected to impact until the year ending July 31, 2012, when there would be a positive EBIT impact of $7 million to $9 million and a similar benefit of $$10 million to $12 million in 2013, said the retailer.
Pumpkin Patch also announced that it would be reorganising its New Zealand head office but gave no further details. However, the New Zealand stores were said to be trading profitably with further store openings planned.
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