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Pumpkin Patch signals retreat from US

Wednesday 1st July 2009

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Pumpkin Patch, the children’s clothing chain, will shut 20 of its 35 US stores, targeting newer outlets that had failed to turn a profit in a shrinking consumer market. The stock jumped 10% to $1.49.

The stores earmarked for closure had “struggled to gain traction in the very difficult retail environment that has prevailed in the market since late 2007,” the company said in a statement.

The remaining stores are mainly along the West Coast of the US, it said.Losses from US stores weighed on Pumpkin Patch’s first-half profit, which fell 7%, and the company warned that the US market continued to be “extremely volatile causing a disappointing drag on earnings.”

The US stores posted a pretax loss of $6.2 million in the first half.While there was early success with the initial store openings, the retailer was hit by import quotas, while the prolonged financial crisis in the US “created significant headwinds for the profitability of the United States operation.

Closing the stores allows the company “to build from a lower base in a much more structured way and enables the United States company to go into the future with far more financial certainty,” Chief Executive Officer Maurice Prendergast said.

US losses will be about $3 million in the year ending July 2010, compared with analysts’ forecasts of about $13 million, he said. Still, the company will incur as much as $42 million in cash and non-cash costs because of the closures, he said.

Businesswire.co.nz

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