Pumpkin Patch is abandoning its US retail operations and cutting staff numbers as part of its response to "challenging and volatile" market conditions.
The New Zealand headquartered childrenswear company will close its 20 US-based retail stores over the next six months, choosing to focus on wholesale and e-tail opportunities in that market instead.
“...[W]hile lease extensions were available the proposed lease terms would make the United States retail operation unsustainable especially given the poor state of the retail environment in that market,” the company said.
Pumpkin Patch is also reviewing the operations of its 41 stores in the UK, focusing particularly on 17 “underperforming” stores.
“Twelve of these stores have leases expiring within the next 15 months and the company will be taking the opportunity to negotiate with landlords appropriate rent reductions or other reorganisation options that would significantly improve earning results from these stores,” the company said.
“Similar discussions will be held with the landlords of the other five underperforming stores whose leases expire after the 2012 financial year. Should acceptable solutions not be found stores will be closed.”
The publicly listed childrenswear business also revealed it is likely to trim staff numbers at its Auckland head office. Pumpkin Patch CEO Maurice Prendergast thanked staff for their “continued support and enthusiasm”.
“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,” Prendergast said.
“We will of course be doing everything we can to help them and the rest of the team during this time.”
Pumpkin Patch said the full benefit of the cost-cutting changes will not be seen until the 2013 financial year. It confirmed all Australasian stores are “trading profitably” and it is likely to expand its Pumpkin Patch and Charlie & Me brands in the local market in 2012 and 2013.
The company estimates its net profit after tax for 2010/11 - before reorganisation costs - will be between $12 million and $14 million.
Pumpkin Patch was established in 1990 and retails and wholesales childrenswear across New Zealand, Australia, the UK, US, Middle East and South Africa. Brands in its portfolio are Pumpkin Patch, Charlie & Me, Urban Angel and Patch Maternity.