Share Investor

Thursday, June 16, 2011

Share Price Alert: Pumpkin Patch Ltd 4

Since my last Share Price Alert on Pumpkin Patch Ltd [PPL.NZX] just a week ago at $1.15, PPL shares have sunk another another 13c or 15% to a current intra-day price of $1.03. shares are off a 52 week low of 98c yesterday after a company restructure and profit downgrade announced Wednesday.

PPL shares have lost approx 59c this year so far and since an April 2010 high of $2.30 they have shed more than 70% of their value.

This might present an opportunity to buy PPL on the cheapish side.

I would be patient though, because management don't seem very clear about the future of the company and its trading proposition over the calendar year and further pressure is likely to come over the rest of 2011-2012 as people close their wallets, head for cheaper less brand oriented fare and the company realises losses from the US store closures and a poor start to "winter" trading - a winter that hasn't arrived yet and will be severely impacting on margins.

This will not last however, PPL is a good brand and once the economy gets going again - whenever that is - we will see this company doing better as mums start to look for brands again.

A rider to this is the poor management of the company. It needs to be changed because of the poor performance of the company and bad decisions made over the last 5 years and if it does the company will clearly be better off without the weight.

Again, be very patient and look for further weakness to buy. This share has more downside to come.

Disc I own PPL shares in the Share Investor Portfolio

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Discuss PPL @ Share Investor Forum
Download PPL Company Reports

Buy Pumpkin Patch Clothing

Buy What Was I Thinking: A Memoir @ Fishpond.co.nz

What Was I Thinking: A Memoir, by Paul Henry

c Share Investor 2011

Pumpkin Patch Ltd: Management need to walk

I have been a long suffering Pumpkin Patch Ltd [PPL.NZX] for 5 years and the losses to the portfolio have been significant in terms of this share.

The latest bad news and profit downgrade out yesterday has got me thinking about the future of this share in the Share Investor Portfolio, and the future for the company under present management.

Lets go back over the last 5 years and see how the company has progressed.

Revenue for the patch has gone from $280 million and $24.6 million profit in 2005 to $381 million revenue and $25.5 million profit in 2010. It hasn't been a straightline from 2005 - 201o but patchy progress with big dips in profit between those years.

The entry of the company into the United States in 2005 was done slowly and they tested the market but clearly mistakes were made along the way as they continued to roll out US stores even though they never really fired. In 2009 the company made a decision to abandon 20 or so US stores that were bleeding red ink the most and held onto around 15 that they saw as promising. Over the last 2 years the company even opened an additional 5 stores in that market!

As we know yesterday the pumpkin pulled the plug on the remaining US stores with a cost of some $11 million, which takes the combined cost of entry into the US market of close to $50 million. This excludes lost opportunity costs.

Now I wasn't against expansion into this market and seemed very bullish about the long term prospects for the company back in 2008 but much water, poor decisions, and 50 million bucks has passed under the bridge since then so you can excuse me if my mind has changed somewhat.

The expansion was clearly executed poorly.

Yes, retailing has been suffering globally over the last 3 years, especially in the United States but management should have seen the writing on the wall after 3 years of being in the states in 2009 and pulled the plug back then. It defies belief to think that they were still confident that the company could make a go of it and took a further 2 years to come to yesterdays conclusion.

Management that made decisions to enter the US and stay there while sustaining these big losses are still at the helm and shareholders should be asking whether they should still be there given they have problems in the United Kingdom with stores having been there for the best part of a decade and yet to turn a profit yet management are bullish about being in this market:

"The United Kingdom and the recently opened Ireland stores remain an important part of the Company’s long term growth strategies. The plans being developed for the United Kingdom will enhance overall short term earnings performances and provide a stronger and more sustainable platform on which to implement future growth strategies".

I am picking that UK stores will be closed sometime in the future, they should be, they are losing shareholder money, but management still see fit to continue their failing experiment.

Ironically the only people losing their jobs are some at head office in Auckland and direct store management and workers on the ground in the United States and management have commented on this in yesterdays release:

“We have always prided ourselves of the closeness of our teams that operate across the business. While the decisions we have made today are necessary we cannot overlook the fact that a large number of our team members will be impacted, with many being long serving employees who have contributed to the success of Pumpkin Patch over the years. We will of course be doing everything we can to help them and the rest of the team during this time. We would like to thank all of the team for their continued support and enthusiasm for the brand”.

I would like to see a board replacement and the resignation of key directors including CEO Maurice Prendergast. Their expansion plans have failed dsmally and have cost investors hundreds of millions in lost share value and close to $50 million off the bottomline.

Nothing personal, its just business.

Disc I own PPL shares in the Share Investor Portfolio

Pumpkin Patch @ Share Investor

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Discuss PPL @ Share Investor Forum
Download PPL Company Reports

Buy Pumpkin Patch Clothing

New From Fishpond.co.nz

Allan Hubbard: Man Out of Time - By Virginia Green

c Share Investor 2011

Wednesday, June 15, 2011

NZ Herald backs Sky City Convention Centre to the hilt

At the risk of boring my readers rigid with yet another post about the Sky City Convention Centre, let me be as brief as I can.

The New Zealand Herald has been highly critical of Sky City Entertainment Group Ltd [SKC.NZX] in the past in its pages but has come out earlier this week and fully backed the company in its proposal to fund a National Convention Centre for the benefit of all New Zealanders:

The strongest argument for Sky City building and fully funding its construction and ongoing costs is encompassed in the following key paragraphs:

"But if SkyCity can make a convention centre pay without need of a public subsidy, its case is better. It means the public will not be taking on the risk that the centre will not attract sufficient conferences on the scale required - a risk all the greater when it is operated by a public body with public finance to fall back on.

SkyCity will carry the risk, giving it every incentive to compete keenly with other international conference destinations. Auckland's interest will be carried by a company that already runs a smaller convention centre with its casino. It is, as a Labour Party spokesman complains, a "multinational". It knows the business and must have confidence that Auckland can compete.

It is not clear whether the company's request for additional casino capacity is vital to its convention plans. It may be that the only thing the company needs from the Government is an assurance that it will not fund a competing facility. No business can compete with a bottomless public purse.

SkyCity has proven its competence and its commitment to Auckland. This investment offers more jobs, more visitors, more business for the city at no public outlay. In the end, that must recommend it." NZ Herald, 14 June 2011

The issues over negotiating details around gaming law changes are a moot point and sides taken by various members of the public must not cloud the ultimate aim of the convention centre and that is to provide a stimulas to the economy at a time when the country is suffering the worst recession since the Great Depression at no risk to the local or state governments.

That clearly must be applauded whatever side you come down on in terms of politics and attitudes to gaming.

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c Share Investor 2011

Tuesday, June 14, 2011

VIDEO - Sky City Entertainment Group : Parliamentary Question Related to Convention Centre

Share Investor

Thursday, June 16, 2011

Share Price Alert: Pumpkin Patch Ltd 4

Pumpkin Patch Ltd: Management need to walk

Wednesday, June 15, 2011

NZ Herald backs Sky City Convention Centre to the hilt

Tuesday, June 14, 2011

VIDEO - Sky City Entertainment Group : Parliamentary Question Related to Convention Centre

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