Change of tack benefits Pumpkin Patch

Shares in children's clothing retailer Pumpkin Patch leapt today after the firm upgraded its earnings outlook due to better-than-expected fourth quarter trading.

The firm said it now expects net profit before non-recurring reorganisation costs for the year to July 31 to come in at $10.1 million.

That beats a forecast of $9.7m from brokerage Forsyth Barr, although the improved level is still short of the $12.6m profit reported for the same period a year ago.

Pumpkin Patch's share price rose 11 per cent $1.01, its highest level since early May, but the shares have lost about 6 per cent of their value over the past 12 months.

The firm said both debt and inventory levels will come in lower than market expectations, with bank lending at around $55m compared with $61m a year ago, and inventory is set to come in at $62m versus $84m previously.

The results appear to vindicate the firm's strategy to close its underperforming stores in the US and UK, and instead focus on selling its products through its own online channel and through partnerships with firms like Amazon.

Pumpkin Patch said online sales have topped the $30m mark so far this year, and are on track to increase by about 50 per cent on last year's levels.

The company expects to release the full set of annual results on September 27.

- © Fairfax NZ News