Pumpkin Patch eyes new market

Pumpkin Patch is targeting a previously untapped sector of the childrenswear market for growth with the clothing retailer planning to launch a new playwear brand in stand-alone stores across Australasia this year.

The company is keeping the details of the new brand close to its chest but plans to launch it within the next three months with an initial group of six to eight stores opening by the end of the year.

The new stores will be in addition to the 30 to 40 new Pumpkin Patch stores expected to open in New Zealand and Australia over the next three years.

Pumpkin Patch does not expect any immediate impact on earnings or its newly reduced debt levels from the move, but said it believes the new brand will be a driver of earnings and cash flow growth in the future.

Chief executive Maurice Prendergast said the playwear end of the childrenswear market – which the company has not catered for in the past – accounted for more than 70% of the $3 billion per year Australasian industry.

He added that the company’s introduction of a dual brand aimed at a different segment of the market was a business model that had been successful for numerous international clothing companies.

“This move will allow us to leverage our existing infrastructure and retail expertise for the benefit of both brands.”

Last month the company revealed that it had lifted its interim net profit by 50% to $14.3 million, even though revenue was down 8.1% for the six months ended January.

With its debt levels slashed by 70% and the company pulling back on its plans to expand further into the volatile US market, the retailer made it clear that the potential for future growth primarily rested in its local performance, especially in Australia, which accounts for more than half of its revenue.

Today’s announcement has backed up that local focus, but Mr Prendergast said there were still “considerable long term growth opportunities” for the new brand in some of the retailer’s 22 global markets.

“We already have interest from a number of wholesale partners who see opportunities for the new brand in their home markets so we are encouraged about what we might be able to do internationally”.

The company’s share price (NZX:PPL) has risen by 7.3% since the interim result was released last month and currently sits at the $2.20 mark, after reaching an annual high of $2.30 last week - the highest level since early 2008.

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