New Zealand’s children clothing manufacturer Pumpkin Patch is likely to close its UK retail business after appoint administrators to review its 36 stores in Britain.
The company's share price rose 4 cents yesterday, or 5.7 per cent, to 74c on news it had appointed administrators to its British operation, according to Stuff.co.nz.
The announcement, largely anticipated by the market, follows an extensive review of the 36-store British retail operation. The group has 400 staff, and restructuring costs could be up to $32 million, the company said.
The latest development comes as it prepares to shut its last store in the United States this weekend.
It closed 20 US stores in the last year.
"That closure programme that we outlined to the shareholders last year, we've pretty much executed all according to plan and on time," Pumpkin Patch's chief financial officer, Matthew Washington, said.
He believes the British move will bring benefits. "I think, overall, the whole announcement is positive. Obviously, it's sad from an employee perspective, but the decision is a pretty obvious one from a financial perspective, so I think that's a positive for shareholders ... We've given them some certainty regarding a strategy in UK retail."
The probable closures would simplify and strengthen the business and allow it to focus on its core business units – its strong New Zealand and Australian businesses, which have 185 retail stores. It also had 20 international wholesale markets and thriving online businesses operating in five international markets.
"They're the ones that make money and will grow into the future," Washington said.
"Without our stores there, we can potentially explore some wholesale opportunities that we couldn't while we had our stores ... so there's some good things that will come of it."
The company was happy with online and was excited about two potential new wholesale deals. It also had a "pretty good" trading period over Christmas in Australasia, to be highlighted in the company's half-year results around late February.
Asked if any British stores might survive, Washington said: "That decision is up to the administrator. However, we're expecting most, if not all, stores to close."
Morningstar analyst Andrew Lange said the move was widely predicted. "It's no big impact on its share price – it's actually been quite a bit of a positive. I guess it's just consolidating the business [so] they're not throwing cash down the black hole, and bringing the business back from being over-stretched and focusing on the basics, on their core markets of New Zealand and Australia." More at Stuff.co.nz