Pumpkin Patch’s head office and distribution centre are located on the one site in Auckland from which all the business operations are managed and from which all stock is distributed. Pumpkin Patch has in place procedures to ensure that disruption to business in the event of a disaster affecting the site is minimal and in particular holds general insurance over the site. However, a major disaster affecting the site may adversely affect the ability of Pumpkin Patch’s personnel to manage the business and may adversely affect Pumpkin Patch’s earnings and financial position.
The long term success of Pumpkin Patch depends on its ability to interpret trends in the children’s clothing market. While this has been successful in the past there is a risk that new designs will not be well received by these markets resulting in Pumpkin Patch having to clear inventory at a discount which would affect its earnings.
The Company may encounter higher levels of competition than it currently experiences. Any increase in the competitive environment may have an adverse effect on Pumpkin Patch’s business, earnings and growth.
Third Party Retailer Arrangements
Pumpkin Patch’s future strategy involves selling a greater proportion of its products through arrangements with agents and distributors. There can be no assurance that these arrangements, once established, will continue.
In the event that one or more of these arrangements ends or proves unsatisfactory, the Company would seek to negotiate acceptable alternative arrangements, or to open its own stores.
Management of Growth Opportunities
Pumpkin Patch is pursuing new initiatives, including expansion within existing markets and into new markets and new distribution models. Pumpkin Patch expects that growth and increased operating complexity will place additional demands on its systems and its personnel given the additional time and space needed to service the greater demand for product and to anticipate and meet the particular requirements of new markets and new initiatives. If the Company’s systems, personnel or distribution networks are unable to keep pace with these demands, the business, operating results and financial condition of Pumpkin Patch may be adversely affected.
If new initiatives cannot be implemented satisfactorily, or once implemented, fail to perform satisfactorily,
Pumpkin Patch may need to withdraw from an activity which may adversely affect earnings and assets.
Pumpkin Patch may find that it cannot continue to expand its business in the New Zealand and Australian market. This may result in lower growth or decreased earnings from this market.