Friday, January 20, 2012

Pumpkin Patch Ltd: UK Store closure better late than never

PPL Store, Metrocentre Gateshead, UK
News out yesterday that Pumpkin Patch Ltd [PPL.NZX] 36 UK stores are to be put into voluntary administration is no surprise to most PPL watchers but is a surprise to some, like me, who think it should have been done 24 months ago when the writing was clearly on the wall. Management have taken too long to make a decision. Curiously the Ireland operation will continue to operate - how strange.

Apparently it is up to the receivers what happens to the stores now but it isnt clear just what that is yet.

Neil Cowie, Pumpkin Patch Group’s CEO:

"Cowie added “As part of the administration process we are effectively handing over the day to day control of the UK subsidiary to the administrators. As such we cannot pre-empt what actions the administrators may take in the coming days and weeks. However we anticipate that if they cannot find any alternative options some or all of the UK stores will be closed.

Cowie continued “We are confident that there is a place in the UK market for our brands. This is supported by our fast growing UK online operation and the fact that 750,000 customers shopped at our UK stores over the last 18 months. In fact the review highlighted a number of interesting opportunities for Pumpkin Patch and Charlie & Me in the UK and we will be exploring these over the coming months".

Does that mean the stores can continue as Pumpkin stores but the brand licensed to a new owner? That is one scenario but we will have to stand-by to find out.

The ditching of the UK business will of course cost more shareholder money - around 11 million in cash off the first half result coming up in March - but the news is positive given ongoing costs of this turkey will be roasted and over with once the UK business is cut off from the parent balance sheet.

Along with their disastrous foray into the United States, which ended in 2010, Pumpkin Patch management have buried around 50 - 60 million in cash in a hole in the garden somewhere and some dog has dug it up never to return it. Zip, nil, nada, GONE!

We must move on though it is only money after all (stop rolling your eyeballs) and look at what us shareholders still have left. 195 odd stores in New Zealand and Australia (a handful in one of the PIIGS, Ireland) and a good brand slightly dented by a tired image and poor supply chain.

The retail outlook in Australasia doesn't look too cute though but it will see a recovery over the next few years and a slimmed down PPL will be ready to do what it does best. Sell its well known well-loved clothes and brand to the public.

Lets hope we can ditch the few remaining directors and management that have made the last 5 years a pain in the backside.

Disclosure I own PPL shares in the Share Investor Portfolio.

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